By Tim Wishart

SAVING in a pension is one of the most tax-efficient ways to invest for your future. But to many people, pension rules seem like a minefield, and the most recent changes in pension legislation have made this topic even more challenging. In addition, there’s tension surrounding a growing disparity between public sector and private sector pensions, which could pose a threat to your financial goals.

Key pension questions to consider include how many different pension plans do you have and could you lay your hands on the account details for each one right now? In addition, do you know how much is saved in each one and how well they are performing? What are the charges and levels of risk for each plan? How much income will you need in retirement to live life the way you want? Are your pension funds and other assets enough to provide that income?

If you aren’t sure of the answers to some these questions, this could be an ideal time to review your pension and retirement plans, and recalibrate them.

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You may be aware that the government recently approved two key changes to pension rules. This has created an excellent opportunity for many to top up their pension savings and take stock of what they’ve already got.

Firstly, the Lifetime Allowance (LTA) tax charge has been removed as of April 6, 2024. Previously, anyone withdrawing benefits from their pension fund above the LTA of £1,073,100 (or the applicable fixed protection amount) was subject to a tax charge. This could be either 55% or 25%, depending on whether they were taking a lump sum or income.

The Spring Budget in March 2023 reduced this charge to 0%. More recently, last year’s Autumn Statement confirmed that the LTA would be removed entirely from April 6, and this has now taken effect.

Thus, you can now theoretically add to your pension (within set limits) without worrying about a penal tax charge if you breach the old LTA. If you have had to stop paying money into your pension fund to avoid this tax, there’s a chance to add more now.

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Secondly, the maximum annual contribution is being increased from £40,000 to £60,000 – although this is reduced for high earners. It’s worth noting that this legislation could change again if a new government is elected – so the opportunity could be time-limited.

You could benefit from these changes in legislation if you would like to pay more money into your pension, have a pension fund above or near the previous lifetime allowance figure of £1,073,100, or a higher fixed protection amount. You could also benefit if you stopped contributing to your pension and applied for fixed protection in 2012, 2014 or 2016, or have one or more old pension funds that might be treated differently under the new rules.

Also, are you aiming to retire within the next couple of years, or would like to retire even earlier than you’re currently planning? Have already made withdrawals from your pension but then gone back to work? Do you want to reduce the inheritance tax burden on your heirs or might you inherit a pension soon?

Caution is needed, however. These legislation changes can seem to make pensions an even more tax-efficient way to invest – but pensions rules are not straightforward. If a new government is elected, there’s no guarantee that the LTA wouldn’t be reinstated, which could create issues if, for example, you use the current change to breach your fixed protection. Changing your pension contributions might also affect how you draw your salary.

This means it’s essential to get the right advice and consider your financial arrangements overall before making any decisions.

Adam & Co’s focus in Scotland is to deliver excellent integrated wealth management services to clients (including on pensions) – and that’s why we are incredibly happy that the acquisition of Intelligent Capital enables us to considerably expand our financial planning capability.

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David Bremner, director at Adam & Company, said: “Our vision at Intelligent Capital has always been to provide the best, most comprehensive financial planning services and in Adam & Company – and CGWM UK – we have found a firm that shares our culture and brand values. We are excited about the opportunities that our new partnership brings to our clients, who now have access to the expertise in the centralised investment office and colleagues all over the country.”

Tim Wishart is head of strategy and development at Adam and Company