Legal and General has unveiled a series of marketing tools to help advisers encourage clients to take advantage of the "carry back" rule before it is abolished.
The “carry back” rule, which is abolished on January 31, allows clients to contribute in the current year but choose to have the payment to be treated, for tax purposes, as if it had been made in the preceding tax year. Earnings from any of the five previous tax years can be used to calculate a client’s total allowance.
To try and encourage people to take advantage of the facility, Legal and General has produced letters and flyers for clients, along with a guide for advisers which covers the technical aspects of the rule changes for personal and stakeholder pensions, and retirement annuity contracts along with worked examples.
Martin Wigginton, pensions marketing director at Legal and General, says: “With only seven weeks left, time is of the essence and our new range of material really gets that message across. Using 'carry back' is a great opportunity for all taxpayers, but it can provide even greater tax savings for clients who are currently basic rate taxpayers but were higher rate tax payers in the previous tax year.”
In this case, explains Wigginton, a client can carry back a pension contribution into the 2004/2005 tax year and claim tax relief at the higher rate. He adds this could also apply to clients who were higher rate taxpayers in the last tax year, but are perhaps on maternity leave or just started a career break.
Wigginton continues: “This could also appeal to those clients who are self-employed or may be in deferred retirement or who are retired. As ‘carry back’ is only available until January 31 2006, to get a head start financial advisers could send the ‘carry back’ flyer and letter to their clients’ before Christmas – it could help clients receive a post-Christmas tax boost!”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7968 4558 or email [email protected]IFAonline
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