Baby boomers have less than one year to decide if they wish to take early retirement, or they could end up waiting an extra five years to leave work, says Killik & Co.
The firm is urging baby boomers to consider making a lump-sum payment into their pension fund, to maximise their tax benefits and increase their retirement income.
The UK retirement age rises from 50 to 55 on 6 April 2010, meaning those who are aged over 50, or who will turn 50 before this date, will need to consider now whether they wish to retire early, or be forced to wait several more years.
Whether investors are considering retirement in the next twelve months or not, Malcolm Cuthbert, partner at Killik & Co, is urging them to consider making a lump sum investment into their pension fund to maximise their future income.
Until 6 April 2010, investors aged over 50 can take a 25% lump sum from their pension fund, even if they intend to continue working. Cuthbert says investors could use this to reclaim a significant amount of tax.
If a higher rate taxpayer places £8,000 in their pension fund, this would be grossed up to £10,000, with a further £2,000 reclaimable on their tax return. The net cost of this £10,000 contribution is just £6,000, while those aged over 50 can claim £2,500 as a tax-free lump sum.
"Investors wishing to maximise their retirement pot should make sure they are effectively taking advantage of all tax benefits available and drip-feeding regular pension contributions each month to reduce their exposure to market highs and lows," says Cuthbert.
He says rumours of higher rate tax relief on pensions being removed in the 22 April Budget means investors should consider acting urgently to maximise their benefits.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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