UK - Employees may be better off deferring payments into a pension scheme until their late 40s when the government's tax changes take effect, Scottish Life claims.
The new tax regime will entitle individuals to relief on scheme contributions worth up to a maximum of £215,000 per annum from April 2006.
Under the current system, relief is restricted to around 15% of earnings.Scottish Life head of pensions strategy Steve Bee said rather than join a scheme immediately, individuals could put their money into alternative saving products – such as ISAs – to gain tax advantages and put it into a scheme at a later date.
Bee said this would give individuals greater control over their money, along with a greater amount of tax relief as most are likely to be higher rate taxpayers.
He added: “After A-Day (April 2006), pensions will still be a good idea, but it is all now a matter of timing.
“Should you join a scheme on the first day you are able to or is it a good idea to put your long-term savings elsewhere and wait until you are a 40% taxpayer and pay the money in then?
“If you’re going to fill your pot up anyway, why do so as a basic rate taxpayer?
“Why not leave it until you’re in your 40s or 50s and then bang it into the scheme and pick up £40 for every £60 you put in, instead of £22 for every £78 you put in?”
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