Allocating Your Wealth

For many people, the prospect of retirement seems almost unreal: something that might happen in the distant future. Nevertheless, it is important to plan ahead, and time is your most valuable weapon. Building sufficient assets to fund your retirement will take a long time, and it’s worth getting into the savings habit as early as possible. Even putting a small amount away on a regular basis can make a difference over the long term. Investors receive income tax relief on their contributions to occupational and personal pension schemes, subject to certain limits. You can contribute up to £3,600 or 100% of your net relevant earnings (whichever is the greater), subject to an overall maximum of £40,000 in the tax year 2014/15. Your contributions to company pension schemes are deducted before income tax is calculated. For contributions to personal pension schemes, your pension provider will reclaim any tax that you paid before you made your contributions. If you have worked for more than one employer, always check your previous company schemes and work out your entitlements. It is also worth considering individual savings accounts (ISAs) which are tax-efficient ‘wrappers’: all income and capital gains generated by the investments held within are paid out free of further tax. The amount of money you can invest in an ISA is subject to an annual limit (£15,000 during the tax year 2014/15), and this can be invested in stocks and shares or cash.