CAN STUDENTS REALLY BUY SPORTS CAR IN CANADA?????? | IRMAN GILL |



Can I really buy a sports car with my pension?

This is a Woman&Home advertorial.

Yes you could buy yourself a flash convertible with the cash you have in your pension, provided you are 55 and have enough saved up. You could also buy a holiday home or invest in a buy-to-let – once again provided you have enough in your fund. And that is the problem: many of us haven’t saved enough. Alternatively you pay off your mortgage or other borrowing to put yourself on a better financial footing.

But there is one big catch: INCOME TAX.

Only 25% of what you take out from your pension is tax free, this is based on the total of all your pension pots and values*, not the amount you are withdrawing. The rest is taxed at your marginal or top rate.

So if you take out £50,000 as a lump sum you will pay tax on £37,500. This could push you into a higher-rate tax bracket particularly if you have other income

If you are already a higher-earner you could pay 40% tax on the whole lot – meaning £15,000 of it goes to the tax man (if all of it falls within the higher rate tax band). That is more than the £12,500 you would get tax free.

Even if you have very little other income (less than £5,700 a year) and all of it remains within the 20% tax band, you’d still pay £6,357 in tax (that’s because the lower rate taxband is on the first £31,786 of income above your personal allowance of around £10,600 for the 2015/16 tax year).

This is still a big financial hit – so think carefully before cashing in particularly if the lump sum pushes you into a higher tax bracket.

How do I cut this?

Well, instead of taking out a large lump sum, take out smaller amounts so that all of these lump sums either fall within your personal allowance (the amount you can earn before paying tax) which is generally £10,600 and the 20% tax band. For 2015/16 you can usually have an income of £42,385 without paying 40% tax.

So consider:

A series of smaller lump sums, to limit the tax to 20% rather than 40%

Delaying taking your pension until after retirement, when you might pay tax at a lower rate

Taking one 25% lump sum, and then continuing to receive a taxable income from your fund

Deferring your state pension until later (when it will be given a boost) to keep your income lower – and therefore the rate of tax you pay on what you take out of your personal pension could be lower too.






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Date: 06.12.2018, 17:32 / Views: 95252