Lawyer Monthly Magazine - July 2019 Edition

You may have noticed a few recent headlines about the Annual Allowance (AA) and the Lifetime Allowance (LTA), which are the two main types of tax that relate to your pension pot. These allowances refer to the amount you can set aside into your pension, both annually and over your lifetime, without being taxed. As of April 2014, you can make pension contributions of up to £40,000 a year, with any payments above this charged at your marginal rate of tax – possibly as high as 45 per cent. Lifetime Allowances work slightly differently, being set as the total amount you can accrue across your various pension plans over your lifetime without incurring tax charges, with the current LTA set at £1.055 million. On the surface, these may seem generous amounts. However, given the proportion of high earners throughout the profession there is a chance that many could be unknowingly exceeding their allowance limits – thus reducing their retirement income. While the annual ISA limit of £20,000 will still fall under the AA limit of £40,000 – restricting the amount you can put in each year and possibly leading to a smaller retirement income – if you’re looking to avoid being unknowingly caught out by LTA taxes you could consider storing your retirement savings in an ISA. Furthermore, the money you save in an ISA can be withdrawn without paying income tax on it, which is not the case with pension income. You can also access ISAs far earlier than you could a pension, for which the minimum withdrawal age is currently 55. If you may be looking to access your retirement income or even retire altogether at an earlier age, then this ease of access could make ISAs worth considering when deciding upon how to save for retirement. It’s never too early to seek advice Even if ISAs haven’t been in your financial plans this year, it’s never too early to begin planning for the next. Of course, everyone’s circumstances are different, and what is right for one will not be right for another. This is where the specialist expertise of an impartial financial adviser, who understands your personal and professional needs, can pay dividends. LM FIRM PROFILE Wesleyan provides special- ist financial advice and ser- vices to lawyers. For more information about ISAs, or to speak to a Wesleyan Financial Services Consult- ant, visit www.wesleyan. co.uk or call 0800 092 1990. This information is based on our current understanding of legislation. Tax treatment depends on individual circumstances and can change in the future. The in- formation contained in this article does not constitute financial advice. Please remember the value of in- vestments and any income can go down as well as up and you may get back less than you invest. “Given the generous remuneration packages traditionally on offer in the legal sector, many legal professionals may be additional rate taxpayers, who pay a higher rate of tax and don’t receive a personal savings allowance.” 25 Wesleyan JUL 2019 www. lawyer-monthly .com