IFA 17 - Pensions		                                                                           Ruth Allen/Ruthmedia

The issue of pensions seems to have been on the political agenda almost continuously over the past year. One strand of government policy is clear - the state will continue to look after the less well-off in retirement. At the same time, those of us who can afford it must learn to rely less on the state, and make more provision of our own for retirement.

The trouble is that too few of us are saving at anything like a rate necessary to provide a reasonable retirement income. With April 5th and the Budget drawing near, it is time once again to consider our year-end tax planning ideas and opportunities. With the possibility of amending legislation, implementing any planning necessary before the Budget might be crucial.

For most people though, the approach of 5th April represents more of an opportunity to do some standard annual planning - but one that can save them a considerable amount of money. "You could consider making a pension contribution to a Personal Pension Plan," advises John MacPhail, of MacPhail & Co. "This will extend the basic rate tax band, which will reduce the income tax liability of a high rate taxpayer for the current tax year. Where there is no provision, you could consider taking out a Personal Pension or a Stakeholder Plan, which could apply to other family members.

"You could also consider an AVC - Additional Voluntary Contribution - to reduce employee's earnings to below the £30,000 threshold, which would enable them to be a member concurrently of both an Occupational and Personal Pension Plan. If applicable, you could make a pension contribution to reduce the income below the threshold for Children's Tax Credit."

It goes without saying that the world of pensions is complex, and it is always advantageous to seek the advice of an Independent Financial Adviser (IFA). "An IFA can advise you as to whether the particular pension you are holding is the most appropriate product," says MacPhail. "The ongoing changes in the market place and in Inland Revenue rules make regular reviews of your individual plans essential. On re-evaluating your personal plans, you can take advantage of a prime opportunity to add real value."

Recently the Financial Services Authority published a key paper entitled 'To Switch or Not To Switch - That's the Question', analysing the potential gains from switching pension providers. "This should be in the hands of all IFAs," says MacPhail. "It emphasises the need to tread carefully, since not all consumers will gain from switching. But there are still thousands of pension policyholders who took out a pension with above-average charges which have not subsequently been reduced. They could benefit from switching to a cheaper Personal Pension, or to a Stakeholder Pension."

MacPhail's main message is that if you are part of the majority who have not reviewed your arrangements, you could be losing out : "You could gain by moving your funds from an old style individual pension product with high charges and average performance, to a plan with lower charges and more competitive fund performance. Above all, make sure you seek advice from your IFA as soon as possible, since any postponement of a decision may be against your long-term interests."

It is becoming increasingly clear that for the majority of us, when we stop work, our retirement income will be inadequate to maintain our standard of living. The situation may have arisen because of frequent moves in employment, or through investing in pension plans at unrealistically low levels. Despite the current economic climate, there is still favourable tax treatment in personal pension planning, and the way to take advantage of this and ensure an adequate income in retirement is to act now, with the help of your IFA.

MacPhail & Co, 27 East King Street, Helensburgh; 01436 679311; info@macphailifa.co.uk