19th February 2018

Prudential: Pensions Tax Relief – A reliable source of free money

Discover how pensions tax relief works to help with planning for clients.

Winning the lottery has its appeal, who wouldn’t like turning the cost of the ticket into a fortune? Pensions tax relief in essence gives you free money (albeit with a lesser return than a lottery win).

To keep the gambling analogy going, if there was a fruit machine that would pay you out net of tax 85 pence for every 80 pence that you put in (assuming that only basic rate taxpayers are spinning the fruits) who wouldn’t keep playing the machine until the coins run dry?

The main difference with pensions tax relief over gambling is that this money is given risk free. The only risk after receiving the tax relief is where you invest the money.

Please note, any reference to gambling should be caveated that you should only gamble responsibly with money you can afford to lose, and of course when the fun stops, stop! Pensions tax relief, however, is something that you should be talking to clients about. Especially for those that are in tax traps, as the rates of return can be staggering.

Here is how pension tax relief works…

Read full article here.

Tax, Trust & ISA, Pensions