If you’re not quite 55 just yet, you should know this about long-term saving

Long-term saving enables you not only to add to your pension pot, but to earn tax relief of up to 735 euros at the same time. That’s not to be sneezed at! To maximise your tax relief in all the years you save, it’s best to take a moment to consider the amount of savings you set aside in the calendar year you turn 54, as that amount determines how much more you can save after then. Read on and find out more.

What’s important for people who are (almost) 55?

The amount you can save each year in a long-term savings plan depends on your tax situation. The absolute maximum amount is 2,450 euros, and that can earn you tax relief of up to 30%, or 735 euros. It’s important before your 55th birthday to take a close look at the amount you save, because the amount you deposit in the calendar year you turn 54 determines what you deposit in the years that follow. After that, you can reduce the amount you save, but not increase it.

This may sound strange, but the sound reasoning behind it is that most long-term savers who started a contract before turning 55 pay a final tax of 10% on what they’ve saved when they turn 60. After that, they may continue long-term saving without having to pay any additional tax.

However, if they were to increase the amount they save after the year in which they turn 54, they would also have to pay final tax on the deposits they make after their 60th birthday. This is highly detrimental from a tax perspective and should therefore not be done.

To summarise, you should opt for the highest possible savings amount in the year you turn 54 in order to keep all your options open. That’s because you can only reduce that amount in and after the year you turn 55, not increase it.

Is it time to adjust the amount you save?

Thinking about adjusting the amount you currently put into your long-term savings plan, but not sure whether the right time to do that is now? If so, we’d be happy to advise you during an appointment.

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Want to start long-term saving?

You have until the day before you turn 65 to start long-term saving. It’s a useful way to save that can usually be combined with your pension savings scheme to increase the amount of tax relief you’re entitled to.

How to start long-term saving