Good news or bad news? You decide!

So, it’s April 2019 and we are now into a new tax year! So what? Will it mean anything to you?

Well, to some extent, it's likely to. One positive change is that the starting point at which an individual pays income tax has gone up to £12,500 gross in the tax year. Good news!

Better news is that most will have to pay more into their pension from this month, April 2019, in the last of the planned series of increases in workplace pension contributions, so you will have more in your pension pot when you reach retirement. I fear that some will still not be aware of the cost of this pension increase to them until they see their pay-packet at the end of this month, the first month of the increase. It's a biggie (an employee sees their contribution rise from 2.4% net to 4.0% net of band earnings, as a minimum, but your employer's contribution will also rise from 2.0% gross to 3.0% gross), so you will definitely notice it.

You might find that you gain in paying less tax on one hand and pay more for your pension on the other hand. Bad news or good news? You decide!

As we have indicated before, pensions generally only require two things: money and time. The more you add over a longer term, the higher the value that the pension pot should have at retirement, subject to all the usual points of investment volatility, charges and the like. We note more about investment risk in our example report here:

https://www.saidso.co.uk/pdfs/Financial_Planning_Report.pdf

What does it all mean? The impact of these payment increases on your pension are likely to be illustrated in your annual pension statement and the importance of the projected capital figures for pensions may be lost on some participants, who would fairly want to know what income they will get from the accumulated pot at, say, age 68. As an approximate example, a level annuity (non-smoker, guarantee 5 years, good health) for a person at age 68 might give income of £6,830 per year gross for £121,000 of pension fund and £8,863 per annum gross for a fund of £157,000 (source: The Money Advice Service website).

Is this going to be enough when combined with your anticipated State Pension when in payment? And if you have not checked your State Pension, you can do it here: https://www.gov.uk/check-state-pension

You can pay more than the minimums into your pension, and if you want more at retirement, then it might be worth talking to your employer about how to achieve this.