Chris Thorpe looks at some of the advantages that pensions can bring when tax planning.
Now that the UK has largely caught up with mainland Europe on the provision of pensions, it’s worth considering how useful they can be, not only in provision for old age but also in tax planning.
Income tax savings
The saving that most people obtain from contributing to a pension is income tax relief. A basic rate taxpayer can still benefit from the pension trustees obtaining additional contributions from the taxman, with high or additional rate taxpayers also having their tax bands increased accordingly. Each year, before the budget, there is speculation about whether this regime will be replaced by a flat rate of relief, but so far the current rules remain.