ATTIVO
Pensions need protecting more than ever. Here’s why.
Attivo Pension Series – Part 1
In the first of our three-part Pension series, Ryan Wright, Associate Director at Attivo explores why pensions remain the gold standard for tax‑efficient retirement planning – and why it’s essential to protect them.
Words by Sophie Marie Atkinson
When considering what to do with surplus income, many people struggle to decide between private pensions and ISAs.
Both carry significant advantages, but pensions are highly beneficial to those who can afford to lock their money away for a prolonged period.
Ryan Wright, Associate Director, Attivo, explains why he believes pensions are the best tax‑efficient retirement planning tool in any financial planner’s kit bag:
“Pensions are gold standard investments.
“With a pension, you get tax-free growth, like with ISAs,” Ryan explains, “but you can pay in more and you have larger allowances and limits.”
Ryan is referring to the fact that pensions generally grow free of tax, unlike income from interest and dividends. With ISAs, the current contribution limit is £20,000 a year before paying tax, whereas with pensions, this limit is either 100% of your salary, or £60,000 (whichever is lowest).
A lifetime allowance used to exist for pensions but was scrapped in April 2024 and – despite rumours – has not been reinstated.
This was a limit on how much individuals could build up across their pension pots before paying a tax charge, and during its existence, the limit ranged from £1 million to £1.8 million.
Looking for more tax planning techniques?
Attivo’s High Earner’s Guide to Smarter Tax Planning shares five great tips that you can put into action right away.
“You also get tax relief with pensions.”
“This is essentially free money, making pensions a hugely tax-efficient retirement planning strategy,” says Ryan.
The reason for this is that when paying into pensions, the government adds a top-up, the value of which depends on the amount of income tax paid.
You can also take up to 25% from each of your pensions without paying any tax. However, you must take the money as one or more lump sums (rather than regular income), and you can’t take more than £268,275 as lump sums in total. If you exceed these limits or start taking your pension as regular income, you’ll pay income tax on anything above your tax-free Personal Allowance.
Pensions and IHT: A changing landscape.
Today, another benefit of pensions is that they can be passed on to your family entirely free of Inheritance Tax (IHT) – a tax rate of 40% that is charged on the estate of someone who has died. However, from 6 April 2027, this benefit is set to change…
Get key IHT insights in our upcoming seminar, including:
- Why inheritance tax is now impacting a growing number of families.
- What next year’s proposed pension changes could mean for your financial plans.
- Practical strategies to help reduce inheritance tax and safeguard your family’s wealth.
Keep an eye out for Part 2
In the next part of this series, we’ll explore how pensions interact with IHT now, what’s changing from April 2027, and who may be affected.
In the meantime, if you’d like additional tax planning tips and strategies, be sure to download your free copy of our smarter tax planning guide:
Tax planning is not an activity which is regulated by the Financial Conduct Authority. The levels and bases of and reliefs from taxation can change at any time and are dependent on individual circumstances.