Guest blog by Chris Harrison, Financial Advisor at Parasol Financial Planning
Pensions can be one of the most effective tools for long-term financial planning, yet many contractors don’t review theirs regularly. Here are five practical points to consider that could help you make the most of your pension arrangements.
1. Consider How You Contribute
If you operate through a limited company, you may be able to make pension contributions directly from the company. This can have implications for your corporation tax position and how your pension grows.
Where contributions are made personally, basic-rate tax relief is currently applied by HMRC. For example, if you contribute £100, HMRC may add £25 in basic-rate relief (based on 2025/26 rules). The best approach depends on your circumstances a regulated Independent Financial Adviser (IFA) can explain your options.
2. Understand the Rules
Pensions are subject to a range of rules and allowances, such as:
- Uncrystallised Funds Pension Lump Sum (UFPLS)
- Self-Invested Personal Pensions (SIPP)
- Salary sacrifice arrangements
- Income drawdown options
The rules can be complex, and they can change over time. An Independent Financial Advisor (IFA) can help you navigate the regulations so you understand what’s available and how it might fit with your retirement planning.
3. Keep Your Pension Under Review
It’s common for contractors to have several pension pots from different periods of work. Without regular reviews, it can be difficult to see how these fit into your overall plans.
Annual or biannual reviews with an adviser can help ensure your pension strategy reflects changes in your circumstances, financial goals and market conditions.
4. Know When You Can Access Your Pension
Currently, most private pensions can be accessed from age 55 (rising to 57 in 2028 under current legislation, subject to protection). Deciding when to start taking benefits is a personal decision that depends on your wider financial position, other income sources and your lifestyle plans.
Average retirement ages in the UK 65.7 for men and 64.5 for women in 2024 but are just that: averages, not targets. Your retirement age will depend on your own circumstances.
5. Review the Impact of Contribution Changes
Small changes to your contributions can make a difference over time. For example, increasing your contributions by £100 a month could, over many years, result in a larger pension pot, depending on investment performance and other factors.
This is a simplified illustration and actual outcomes will vary. Reviewing contributions regularly with an adviser can help ensure they remain appropriate for your goals and situation.
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Important: This article is for general information only and does not constitute personal advice. The tax treatment of pensions depends on individual circumstances and is subject to change. For advice tailored to your needs, please speak to a regulated financial advisor. The Financial Conduct Authority does not regulate tax advice.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.
Parasol Financial Planning is a trading style of Cheetham Jackson Ltd (FRN514951) which is authorised and regulated by the Financial Conduct Authority. We are independent for investment and pension business, and when looking to address protection needs, we will provide advice based on fair analysis of the market. The Financial Conduct Authority does not regulate tax advice.
