Many people concerned about the inflation threat to their savings will be considering whether to put any spare money in an investment rather than a cash ISA in the current tax year. Consumer prices rose 5.5% in January, and previous expectations that the rate would peak just above 7% this spring look conservative given the tragic war in Ukraine. But if you are new to investing, and feel lukewarm or cautious at the prospect, one easy and potentially lower cost option open to many people with a work pension is to top up investments already held in their retirement fund. there are broadly three advantages to opting for the pension: Government and employer top-ups; the opportunity to withdraw a 25% tax-free lump sum when you decided to retire; and lower investment charges which are capped at 0.75% on ‘default’ funds and can be even lower. Each year you can pay a total amount equal to your salary but up to a maximum of £40,000 (although this can taper down to £4,000 for higher earners) into a pension and benefit from pension tax relief. This is known as your annual allowance. Those who have spare money to put away towards the end of the tax year and who have not used this allowance can still take advantage of pensions tax relief. The taxman automatically tops up pension payments by the basic rate of 20% and those paying higher or additional rates of tax can claim back another 20% and 25% respectively. However, it’s important to make sure you are getting the maximum possible advantage from free employer contributions into your pension – not just tax relief from the Government – if you decide to pay in extra. You could do this by increasing the percentage you pay in each month, if your employer is generous enough to match it. It is important that you are aware of any potential current and future Lifetime Allowance issues before proceeding.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of March 2022 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.