Retirement savers urged to use ‘handy tool’ to protect their savings from tax | Personal finance | Finance
Pension saving is all about ensuring a comfortable retirement, but it may not be as easy as it seems. In fact, there are a number of tax obligations to keep in mind, along with runaway inflation that is starting to set in.
Fortunately, Britons can take steps to help them achieve the retirement they hope for.
Becky O’Connor, head of pensions and savings at Interactive Investor, looked at ways people could lower their tax bills in the coming year.
For people planning for retirement, contributing more to a pension could be worth it in many ways.
Primarily, it could help Britons accelerate towards their later life goals more quickly, but it could also lower an income tax bill.
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With the rising cost of living and the “biting thrill” of creeping taxes, experts have suggested an ISA technique that might help.
Called Bed and ISA, the idea has been described as simple.
This means that the British would sell the investments they hold outside of an ISA in order to buy back the same investments within their ISA.
It can shelter people from tax in a legal and effective way.
However, people should always be aware that the value of their investments can go down as well as up, and they could get back less than they invest.
Bed and ISA could form a larger part of a spring cleaning strategy, especially for those planning for retirement.
Myron Jobson, Senior Personal Finance Analyst at Interactive Investor, said: “It has to be one of the weirdest terms in the industry, but Bed and ISA transfers are a handy tool, especially if you’re counting pennies anymore. This year.
“It’s a good way to take advantage of any unused ISA allocation. Once in an ISA, these investments will be sheltered from tax.
“LIT and ISAs are the ultimate way to effectively recycle money tax, allowing you to transfer investments held outside of your tax wrapper, if you haven’t managed to fully utilize your ISA allowance this year. .
“There may be CGT implications, depending on your situation, and it’s also worth watching the clock – ii’s deadline for Bed and ISA instructions is 4:30 p.m. on March 30.
“Also keep in mind that not all investment platforms have accepted these transfers during the pandemic, so it’s worth checking with your provider.”