PENSION PLANNING

Pension Planning



Pension Planning

Introduction

Pension planning is proved to be one of the most effective ways of saving and investing in financial market for both high-income earners and average employees. With the increasing market and job complexities, this process has been complicated for employers, advisors, and investors as well. The benefits of pension plan can be explained by investing a 100 euro invested in a pension plan that yields or saves 69 euro as tax relief amount based on a 41% of tax rate therefore, it can be said that the gross amount of 169 euros invested in a pension plan actually cost 100 euros. This process has significant positive results or effects on long term basis. The growth in investment in a pension plan is not subject to tax regulations, and this fact contributes in the enhancement of accumulative benefits (Houghton, T., 1986, p. 20-32).

The employers are also liable for contributing in the pension plan of staff and director as well out of the business profits before taxation. It is considered as tax efficient methodology for shareholders and directors. All pensioners can access this accumulated income after the age of 50 usually.

Pension Planning of directors

Directors and senior executives face aggressive work load and tremendously difficult employment life style. Directors' work aggressively in present in order to make sure the requirement of financial resources. The primary aim of every high earner is to take most of tax advantages due to many alterations in laws and regulations of pension. As per age level, a high income earner can contribute up to 40% of individual's personal income level in pension plan and posses the right to claim tax incentive. This idea is applicable to person born in 1949 or before that is eligible to get State Pension at the age of 65 provided the given terms and conditions. As per law, if some one is born within the years 1949 to 1954, the he is not eligible to claim a State pension un less his becomes 66 and his retirement saving would be reduced by €11,975 in the age of 65. And if a person is born within the years from 1955 to 1960 the he is not eligible to claim an retirement saving until he reaches the age of 67 and he would be loosing €23,950 if he or she claims it in the age of 65. If some is born in the year 1961 or after it then he or she can claim his or her retirement income at the age of 68 and it would be reduced by €35,925 if it is obtained at the age of 65.

The changes in tax incentives related regulations could affect the personal pension plans of individuals and respective actions. Pension is considered as a significant element of financial plans for all employees. The two associated factors of pension are tax relief and long term financial plan are considered as the effective tools of retirement planning that helps in accumulating ...