Making the Most of Things

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One of the things I love most about the career I’ve chosen is the opportunity it gives me to spend time with so many different people of all ages and from all walks of life. I enjoy finding out about them; their families; their ambitions; their concerns and best of all, their triumphs and celebrations. And because of the intimate nature of our discussions – after all, finances are a pretty personal issue – relationships have grown which I hope will continue for many years, as I help them sort out issues that inevitably arise as circumstances (and Chancellors!) evolve and change.

Perhaps the most important thing about my financial adviser role is the continuity I’m able to offer and I know, for many of my clients, there’s a lot of comfort and security in this. It’s always a relief when something hits the doormat and you’re really not sure which way to go with it, to have someone who you know will probably have the answers you need. The fact they also know all about your financial background, so will be able to take into account all your personal priorities and preferences when making suggestions, is an added bonus. And let’s face it a bonus is never a bad thing.

I had rather an interesting discussion with one of my clients, the other day. “Can you,” he asked, “With all of these new changes, use your pension in a similar way to a bank account?”  To which my answer, as with so much else in life, was, “Yes and no!”

Let me tell you what I told him and remember, much depends on how often or how quickly you might need access to the money we’re talking about. But imagine, for the sake of argument, you have £10,000 you want to save/invest. If you put your £10,000 into a NISA/bank account, you still have £10,000. If you put your £10,000 into a pension and you’re a basic rate taxpayer you immediately have £12,500. This is because you get tax relief of £2,500 added to your pension. I like to call this ‘free money’.

Even if there’s no further growth on that sum. Let’s say that you then decided to take it all out: you can have 25% as tax-free cash ie: £3,125, with the remaining £9,375 subject to income tax. If you’re still a basic rate tax-payer you could withdraw £10,625 after tax – not a bad result. Of course it is possible, depending on the period of investment that your original sum might have grown too – better still!

Caveats: Please remember that you need to be 55 years old to take money out of a pension, and what you get back depends on fees, charges, the growth of your investment and the legislation at the time, so you do need to get sound financial advice before making any decisions to make sure that the decision is the right one for you.

Have a good month and let’s hope the weather stays kind!