The future is always unknown, but when it comes to retirement it pays to be in the know
The end of the tax year is fast approaching and marks a significant period of pension change as a result of the Finance Act 2011. The future is always unknown, but when it comes to retirement it pays to be in the know.

These are some of the areas where clever pension planning between now and 5 April 2012 could provide tax-advantageous solutions for you to achieve the retirement you want.

Subject to 50 per cent income tax – pay personal contributions within 100 per cent of relevant earnings threshold to reduce taxable income below the 50 per cent threshold.

Adjusted relevant income over £114,950 – pay personal contributions to registered schemes to reduce taxable income below £100,000, enabling your full personal allowance to be regained and providing marginal rate tax relief of 60 per cent on contributions paid between £114,950 and £100,000.

Carry forward of unused annual allowance from 2008/09 – this will be lost if not used. You must ensure the full £50,000 annual allowance for the 2011/12
tax year is used first, ensuring the pension input period for this contribution ends no later than 5 April 2012.
Employer contributions to reduce taxable profits in trading periods ending before 5 April 2012 – these can be used for carry forward of unused annual allowances, for the current annual allowance and for the 2012/13 tax year.

Registering for fixed protection – this must be completed no later than 5 April 2012. 2011/12 is the last tax year in which money purchase contributions can be paid if fixed protection is to apply. Maximise this year’s annual allowance plus carry forward of unused relief for pension input periods ending in 2008/09 to 2010/11 tax years. Clever use of pension input period planning will allow funding of 2012/13 annual allowance this tax year to maximise input.

Recycling of unused income withdrawals as allowable contributions – minimum £3,600 but could be higher if you have relevant earnings.

Gifting income using ‘normal expenditure’ from drawdown funds – reduces potential 55 per cent tax charge on death from drawdown fund, while ensuring future growth is with the beneficiary and not part of taxable drawdown fund. Funding third-party contributions to pension arrangements of children or grandchildren is an option.

Early crystallisation – for some people aged over 55 crystallising benefits this tax year while the lifetime allowance is £1.8m will create higher retained lifetime allowance for future use.

A pension is a long-term investment. The fund value may fluctuate and can go down as well as up. You may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.