Pension contribution rules have been altered due to the lockdown – can you take advantage?

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Financial wellbeing can be hard to come by at the moment as the UK continues to battles the effects of coronavirus. Recently, the ONS revealed that a specific age group are struggling just to get by.

According to their report “Young People’s Wellbeing in the UK” report, an increasing proportion of young people aged 16 to 24 are finding it difficult to get by financially.

Emma-Lou Montgomery, an associate director of personal investing at Fidelity International, commented on this, noting an unfortunate reality: “People are willing to seek help to improve physical, and increasingly, mental wellbeing, but seemingly still less so for financial concerns. “Knowing just how badly young people’s finances have been affected by Covid-19, it’s critical we encourage open and honest conversations about financial health.

“Reviewing your financial status now and thinking about the next few months ahead of time can help you to feel more in control – being informed can feel like a step in the right direction itself – which in turn has a positive impact on overall personal wellbeing.”

Fortunately, Emma-Lou went on to provide advice for keeping on top of finances, which can be used by people of all ages.

The first piece of advice she offered is particularly prudent for the current climate:

Working from home? Consider claiming tax relief on household bills

As it stands, many people are working from home where they can and with the prospect of a second lockdown on the horizon, more people may need to stay at home in the coming months.

For people in this predicament, additional income could be sought from certain state perks.

As Emma-Lou explained: “If you are still working from home, there are ways to generate some extra money that could boost your retirement savings.

“One way is the facility to claim tax relief on household bills.

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“Up to £6 per week can be claimed to cover household bills while working from home.

“You must be an employee who is home working as a direct consequence of the COVID-19 restrictions – as many firms have closed their workplaces.

“If you are working from home on a voluntary basis, then unfortunately you cannot make a claim.

“There are restrictions on what you can claim.

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“Costs that would be the same whether or not you are working at home, like your mortgage, council tax and water rates cannot be claimed.

“The expenses that can be claimed are the additional costs you incur from home working – electricity, IT equipment and heating for example.”

On the topic of work, Emma-Lou also detailed pensions can be topped up through certain salary changes:

Contributions under salary sacrifice

To encourage people to save for retirement, the government offers a number of fiscal tax perks that workers can take advantage of.

Additionally, as Emma-Lou detailed, the government has adapted some of these rules to account for the pandemic: “Good news for those who contribute using salary sacrifice and who normally have to wait until a ‘life event’ to adjust contributions is that HMRC has made it possible to change salary sacrifice arrangements now as it has classified COVID-19 as a life event.

“If you have a workplace pension, making additional voluntary contributions (AVCs) is another way to pay into it.

“With AVCs, you have the flexibility to make regular or one-off contributions.

“AVCs get tax-relief added to them as well, so long as you haven’t exceeded the annual allowance (£40,000).”

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