Charles de Lastic, Managing Director of Bluebond Financial Planning, explains the implications and why you may need pensions advice.Bluebong Financial Planning provide a range of financial services in St Albans.

The government has decided from 6^th April 2012 to stop allowing employed people to choose to opt out of the Second State Pension (S2P) unless they contribute to a Final Salary (Defined Benefit) pension scheme.  From that date, the National Insurance rebates will no longer be paid to your personal pension scheme. 

You should consider now how you are going to manage in your retirement and seek pensions advice from an independent financial adviser.

What if I’m contracted out?

If you are currently contracted-out of S2P using a personal pension (Defined Contribution), this means that from the 6^th April 2012, you will be contracted back in and have no choice but to build an “entitlement” to the State Second Pension.

Now, the value and growth of a personal pension is based on the underlying assets it holds, and in current conditions many people would have lost money on the value of their pensions.  However, it is still your own ‘pension pot’ which cannot be taken away from you and good pensions advice can help you maximise what you can achieve from any ‘pot’ you have.

So, where’s the issue?

The problem is, by having no choice but to be tied into the government scheme, the money is no longer in your personal ‘pension pot’ but is subject to a future government agreeing to actually pay you the ‘entitlement’ you have accumulated.  The issue here is that there is no separate government pension pot in existence – the S2P is paid out of the current taxes and NI contributions.

With an increasing older population, will the tax intake be enough in future years to pay out your accumulated ‘entitlement’?  I personally would not depend on it.  If this is currently your only retirement provision, I urge you to seek independent financial advice with pensions advice top of your discussion list.

If you’d like more information on financial planning or would like to contact us for independent financial advice and pensions advice, please visit the Bluebond Financial Planning website.

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With the tax codes being so vague and constantlyrepeatedly changing it is easy for everyone to make tax mistakes. Let us explore the big three most common tax mistakes people usually make when preparing their tax forms. Your probably guilty of this and not think anything of it.

The average person do not divide their tax living into company and social categories. Some think that both intertwine but that is not true. Say, as an example, you are filing a disillusion of marriage and you deduct the expense because it is draining your company to the max. Or you take the worst vacation with a customer then make an attent to deduct the expense. That is something you can not do. You have to keep business matters related to business only. Fixing tax mistakes like this can have you in good standings with the IRS. So remember, if you are just enjoying a nice lunch with a client or colleague you can not then deduct the expense.

How you keep records is another tax mishap that is commonly generated by individuals. This doesn’t just envolve your records at your business. Let’s say, for instance, you are in Los Vegas and you win big bucks in a casino. This may occasionally be reported to the Feds. If your tax records are in order you will write down how much money you spent and was awarded. This will give you the ability to use your losses to offset your winnings. But without any records you will end up paying even more on your taxes. Keep a log with charitable donations as well. Use a check instead of putting in dollar bills into a donation cup so you can verify it if needed to. If reporting a large amount then you better have the paper work in case they want to check.

It is not a good idea to throw away your tax forms right after April 15Th. Keep all your documents for that year for at least three years. This way if the Internal Revenue Service has a issue with identifying your identification numbers you will have your documents ready to solve any question. Plus they may want to check that you did not inflate your deduction on a random basis. Things like home owner’s tax, your bank statements, W-2s and 1099 forms could be incorrect so it is best to hold on to them for while. Fixing tax mistakes like this are easy to handle when your forms are in order. Employers must send your tax information out by Jan 31. That way you have time to get replacement documents if a mistake is made.

So the next time you are doing your taxes make sure you do not make these usual tax mistakes. These are as simple to fix as they are to generate. They may seen like minor offenses now but can turn into a big mess if you do not take it seriously.

If you are self employed and you want to get the most savings on taxes as possible then see our self employment taxes  tutorial. Would you like to be able to be self employed and need some help? Find the skills here at our niche business page. Find guides that can help here at our product reviews area.

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