The reputation of the pensions industry as a whole has taken a battering in recent years. Poor investment performance, reduced tax reliefs and thresholds – together with the latest concerns over high charges on pension funds – have made it much less attractive to put hard earned money out of reach for years or possibly decades. And that’s just for those still fortunate enough to be in a position to do so.
Income tax relief has been a major incentive to make pension contributions because it helps to reduce income tax bills. With rumours that the 41% income tax rate relief might be reduced as low as 20% in the upcoming budget there is a real risk that many more people will simply stop funding their pension altogether.
However, if you want to save for retirement and you are currently paying tax at the higher rate, then it still makes good financial sense to invest in pensions. In effect, for every €59 contributed to a pension scheme the State provides a €41 top-up. With your contributions still growing tax free within the fund, there are very few investment opportunities that can compare.
So with the 31st October income tax deadline fast approaching, if you are a higher rate taxpayer, now may be your last opportunity to get top rate tax relief on your pension contributions.
Tax relief can still be claimed against the 2011 income tax bill on contributions paid by October 31st (extended to 15th November for those who pay and file via ROS – the Revenue Online System).
MLMG Financial Advisors, St Helens, St Oran’s Road Buncrana, Co. Donegal. Tel +353 (0)74 9321420 / Fax +353 (0)74 9321421/or email: firstname.lastname@example.org
McLaughlin McGonigle t/a MLMG Financial Advisors is authorised to undertake investment business in Ireland by the Association of Chartered Certified Accountants