Tax changes are pivotal for self-employed to optimise pension savings

New pension rules and frozen tax thresholds highlight benefits of opening a SIPP, our research shows.

New research shows that self-employed professionals need to focus on tax changes and the opportunities they are offering for pension savings and consolidation.

Ahead of this year’s Spring Statement, we are urging the self-employed to focus on changes announced last year which are now coming into effect including the abolition of the Lifetime Allowance for pensions and the increased Annual Allowance.

We are committed to support the self-employed and contractors or those who have become self-employed recently to combine all their existing pensions into one and continue contributing, and also highlighting the impact of frozen tax thresholds.

The annual pension allowance of £60,000 presents a window of opportunity that should not be overlooked, our research shows, and we urge self-employed retirement savers to act now to secure the benefits given the potential for future change. Pension funds are typically accessible from age 55 with age threshold set to rise to 57 by 2028.

The removal of the Lifetime allowance (lTA) from April 6^th 2024 means for most savers individuals can grow their pension pots in excess of £1,073,100 with the tax burden being significantly reduced compared with pre 6^th April 2024 (pre 5/4/24 meant lump sum withdrawals above that limit suffered a 55% tax charge or regular withdrawals were taxed at your highest marginal rate plus 25%)

However, the decision to freeze income tax thresholds is having far-reaching consequences on savings, pushing more self-employed individuals into higher tax brackets and significantly reducing personal savings allowances which are £1,000 in interest tax-free for 20% taxpayers, £500 for 40% taxpayers and zero for 45% taxpayers.

SIPPs offer the flexibility to choose and manage investments as well as a wide range of investment options, tax relief of between 20% to 45% and the ability to consolidate pension pots into one manageable account thus saving on fees.

iSIPP Managing Director Hrishi Kulkarni said: “With the increased annual pension allowance, the removal of the Lifetime Allowance, and the benefits of SIPPs, there are compelling opportunities to secure financial well-being into retirement.

“As the landscape evolves, taking proactive steps now can ensure a more secure and flexible retirement future.

“Opening a SIPP could be a strategic move for self-employed professionals seeking to maximise their pension potential and tailor their retirement savings to their specific needs and goals.”

Pension customers can sign up easily at www.isipp.co.uk to consolidate pension funds into one pot, choose their preferred investment funds and monitor how they are performing 24/7 online, with complete transparency on fees and charges. It also helps individuals and their employers to make contributions.

The free to set up service has no dealing charges or charges to transfer in existing pension funds and enables clients to create their own investment portfolio complementing its existing ‘Choice’ range of Ready-Made funds from world-leading fund managers BlackRock and Schroders.

Our digital pension consolidation service is available to all customers with UK pension funds who are working or have worked in the UK. Built around flexibility, we provide access to over 100 funds under its ‘Create’ option allowing users to build their own portfolio. Our ‘Choice’ range include Ready-Made Portfolios from world-leading fund managers BlackRock and Schroders. BlackRock’s multi-asset, risk managed MyMap range of funds are available which include an ESG fund and iSIPP also provides access to the Schroders’s Shariah compliant fund. Focusing on transparency, the annual trust fee is £200 plus a 0.25% platform services fee. Funds with OCF (Ongoing Charges Figure) start at as low as 0.17%.

Disclaimer

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.