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Investing in tax efficient savings.

RICHARD Jones of Security Financial Services says there are two forms of investment that are particularly tax efficient... Individual Savings Accounts (ISAs) and pensions.

He reports that in the former case, money can be invested up to an annual allowance of pounds 10,200 and the money grows free of UK capital gains and income tax - other than the 10% withholding tax on dividends from UK companies - and you can take your money out at any time totally free of tax.

Richard says pensions also grow in the same tax favoured environment, but only a quarter of the accumulated fund can currently be taken as tax free cash - and then only once you have reached 55, but before the age of 75.

He explains: "The balance has to be taken as a taxable income, although not until you reach age 77, if you do not want to. These rather confusing upper age limits are currently under review."

Richard says the big difference is that personal pension contributions receive tax relief at 20% on anything up to the greater of pounds 3,600 a year and your entire income, provided you do not exceed the annual allowance, which is currently pounds 255,000.

He adds: "Those paying 40% tax can also get an additional 20% higher rate tax relief, although the rules change for those with incomes above pounds 130,000, and you should ask for details."

. Security Financial Services is authorised by the Financial Services Authority.
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Publication:Daily Post (Liverpool, England)
Date:Sep 20, 2010
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