Tax Planning for Retirement

Tax Planning for Retirement

Retirement planning tends to focus on pensions and it’s easy to see why. The sum in your pension pot is potentially the gateway to a life long dreamed of. At Harpur Wealth Management the pension has a hugely important part to play in the creation of retirement income. Equally important to your retirement strategy though, is consideration of the tax you’ll pay on private and state pension income.


The tax we pay on what we earn and our National Insurance contributions are a major expenditure throughout our working lives – and they will continue to be so once we retire. Tax planning for retirement is all about assessing, early on, how best to use available tax allowances and reliefs to minimise the tax you pay once you are no longer working.

Tax Allowances and Reliefs

Harpur Wealth financial advisors use a range of approaches to create an effective retirement strategy for their clients. Tax allowances and reliefs are one of these, alongside pensions and an investment portfolio. Our aim is to use them to minimise the tax you are paying on your pension if it becomes your major source of income.


The current 2020/21 allowances and reliefs are:


  • Personal Allowance – £12,500
  • Pension Tax Relief – 20%/40%/45%
  • Dividend Allowance – £2,000
  • Personal Savings Allowance – £1,000 (bank interest on current and deposit accounts)
  • Capital Gains Tax – £12,300 (sales of investments and shares)


Whilst these allowances may not generate the kind of eye-watering sums a pension pot can conjure, they are year-on-year savings. When used strategically, they can generate considerably more than the initial sums cited above.


Start Your Retirement Planning Early

Key to successful tax planning for retirement is starting early. Financial strategies are marathons rather than sprints. Our financial advisors will be looking at ways to structure the financial resources you have in order to make them go further. This may involve spreading allowances across husband or wife, drawing from your private pension to take advantage of personal allowances, or using your capital gains allowance against sales on your investment portfolio.


When clients come to us once they’ve retired or when they’re just about to, there’s less we can do in terms of tax strategy. This means that the year-on-year savings that we could have ‘baked in’ to their savings, pension and investments are now more difficult to achieve, and are less cumulatively advantageous.


About Harpur Wealth Management

Our team of financial advisors are experts when it comes to planning for your retirement. They will take time to understand what it is you want from your retirement. Then, they’ll create a strategy that will allow you to achieve it. Getting to know our clients is a hugely important part of the process for us. The better we understand what you want your money to do, the more accurate we can be in creating ways to achieve it for you.

Would you find it helpful to speak to one of our local financial advisors about your retirement planning? Call our friendly team at Harpur Wealth Management today to book a FREE consultation – 01234 924620

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