The Dow dropped 420 points on Thursday after President Trump said his administration will impose tariffs on steel and aluminum imports. The Nasdaq and the S&P 500 declined 1.3% apiece.
Trump's controversial tariff announcement caught investors off guard and immediately raised concerns about retaliation from China or other major U.S. trading partners.
"This is the first shot across the bow over a trade war," said Art Hogan, chief market strategist at B. Riley FBR. "And nobody wins a trade war."
Trump said his administration would impose a 25% tariff on steel imports and a 10% tariff on aluminum. It was not immediately clear whether Trump would exempt some countries from the tariffs, as his national security advisers have urged him to do to avoid hurting U.S. allies.
Corporate America has warned Trump that tariffs could backfire. Last month, the Business Roundtable warned of the risk of "foreign retaliation" that would "harm the U.S. economy."
Investors will be looking to see how U.S. trading partners react to the tariffs.
Beyond worries about retaliation, the tariff news drove concerns about rising costs for companies that rely heavily on aluminum and steel, like auto and plane makers. Imports make up about a third of the steel American businesses use every year, and more than 90% of aluminum used here. Shares of Boeing (BA) fell 3% General Motors (GM) dipped 4%, and Ford (F) dropped 3%.
If the tariffs result in higher prices on steel and aluminum, companies that rely on those products may pass on some of the costs to consumers. That raises the specter of creeping inflation.
"This clearly will [lead to] higher prices in the production chain, which is part of the inflation path," said Quincy Krosby, chief market strategist at Prudential Financial.
The timing of the tariff news surprised Wall Street. A formal announcement was expected at some point Thursday, but then it was called off. Later, Trump mentioned his tariff plans in a hastily arranged listening session with steel and aluminum executives. And he didn't provide crucial details, such as whether certain countries will be exempted.
Concerns about trade come at an already shaky time on Wall Street. The S&P 500 and Dow fell about 4% in February, their worst month in two years. Fears about inflation and soaring bond yields caused a surge in volatility, including two 1,000-point plunges for the Dow.
The market had come back as investors focused on the strong economy and booming corporate profits. But stocks fell sharply again on Tuesday and Wednesday, putting the Dow back in negative territory for the year.
Turbulence has picked up as well. The VIX (VIX) volatility index spiked 15% on Thursday. Selling pressure will climb as volatility increases, Krosby said.
At least two corners of the stock market cheered Trump's tariff announcement. U.S. Steel (X) and AK Steel (AKS)soared 6% and 10%, respectively.
Century Aluminum (CENX) also spiked 7%. Another major aluminum maker, Alcoa (AA), gained 1%.
Trump's tariff moves could force investors to confront another trade issue: NAFTA. Trump has repeatedly threatened to tear up this major trade deal with Canada and Mexico. Talks to renegotiate NAFTA, a major piece of the U.S. economy, have so far failed to produce a solution.
"It sets off the protectionist fears that had been lying dormant," said Hogan.
� CNN's Jeremy Diamond contributed to this report.
Thursday, March 1, 2018
Fed's Powell sees 'no evidence' the US economy is overheating
Federal Reserve Chairman Jerome Powell sees no sign that US economy is building too much steam.
The job market is tight, but Powell isn't worried that wages are rising too quickly, which can lead to inflation. If anything, he's surprised wages haven't risen faster.
"There's no evidence that the US economy may be overheating," Powell said during a Senate Banking Committee hearing. The newly minted Fed chair made his second appearance on Capitol Hill this week to deliver the central bank's twice-a-year report on the state of the US economy.
Wage gains have been slow in the years since the Great Recession, which is one reason it hasn't felt much like a recovery to many people. Wages finally picked up in January, growing at the fastest pace in nine years.
Related: Fed's Powell says he's confident 'good years' are ahead for U.S. economy
"I'll be honest, I would have thought you'd seen more wages increase by this point," Powell said during the hearing. "And I do think you'll begin to see wage increases coming."
Fed officials have been patiently waiting for paychecks to grow. The challenge ahead for policymakers will be to stay one step ahead of price pressures.
"The thing we don't want to have happen is to get behind the curve of inflation and have to raise rates quickly and cause a recession," Powell told lawmakers.
The Fed has been trying to nudge inflation higher without risking a recession. It remains below 2%, the level the Fed considers healthy for the economy. Fed officials anticipate inflation will get closer to their target this year.
For years, when unemployment was higher, the risk of inflation was low � and not much of a worry for the Fed. Now that unemployment is historically low, central bankers have to be more careful about keeping it in check.
Related: Fed's Powell says he's confident 'good years' are ahead for U.S. economy
"I'll be honest, I would have thought you'd seen more wages increase by this point," Powell said during the hearing. "And I do think you'll begin to see wage increases coming."
Fed officials have been patiently waiting for paychecks to grow. The challenge ahead for policymakers will be to stay one step ahead of price pressures.
"The thing we don't want to have happen is to get behind the curve of inflation and have to raise rates quickly and cause a recession," Powell told lawmakers.
The Fed has been trying to nudge inflation higher without risking a recession. It remains below 2%, the level the Fed considers healthy for the economy. Fed officials anticipate inflation will get closer to their target this year.
For years, when unemployment was higher, the risk of inflation was low � and not much of a worry for the Fed. Now that unemployment is historically low, central bankers have to be more careful about keeping it in check.
That's why, for now, Powell believes the right course is for the Fed to raise rates gradually to help extend the nine-year economic expansion. The US central bank has penciled in three rate hikes in 2018.
"My expectation is that will continue to be the appropriate path as long as the economy performs this way," Powell said.
The Fed chair boosted his economic outlook earlier this week during a House Financial Services Committee. The rosy forecast caused investors to raise the odds the Fed may go further and raise rates four times this year.
The Fed holds its next interest-rate policy setting meeting later this month.
How Third Party Auto Insurance Works And Why You Need It
Third party auto insurance simply means that if you crash/damage someone else�s car, the insurance company settles the bills, the insurance company pays the owner of the vehicle (Third party). If you injure someone with your vehicle, the insurance company also pays for the damages incurred by the third party .
For a third party auto insurance policy, the first party is you; the second party is the insurance company while the third party is everyone else. It covers you for claims made against you by other drivers after an accident.
If you are responsible for a crash, it is likely that you are going to pay for damages. Auto insurance policy covers all the claims made against you including injuries obtained by the third party.
However, under this insurance policy you cannot claim for the car you are driving as the insurance policy doesn�t cover the car you are driving. The insurance policy only covers the car you hit.
If you choose a registered insurance company, you will be able to escape such dramatic and unplanned costs. For example, if you hit a pedestrian on the road, the insurance company will pay the bills.
Note that the money to pay for damages comes from premiums. If premiums hasn�t been paid to the insurance company, there won�t be any compensation in case of accidents.
However, it is worthy to note that claims you make on an auto insurance company maybe limited. Some insurance companies may only cover the loss up to a certain amount say N1000,000. This simply means that if a vehicle you damaged is worth N4000,000 the insurance company will only provide N1000,000. So it is important to find the limit to loss the auto insurance company you choose covers before subscribing.
If you try to cheat the insurance company, you maybe arrested, so it�s good to be honest always. Be honest, don�t try to rip them off or stage an accident and you will be paid.
List of Auto Insurance Companies in US
American Automobile Association
Auto-Owners Insurance
Safe Auto Insurance Company
State Auto Insurance Group
Unitrin Direct Auto Insurance
Workmen�s Auto Insurance Company
List of Auto Insurance companies in Nigeria
Industrial & General Insurance plc
Cornerstone Insurance plc
Aiico Insurance Plc
Adic Insurance Ltd
Leadway Insurance
Zenith Insurance
Cheki
We are only explaining how auto insurance works and listing auto insurance company More Auto Insurance companies coming soon. kindly share to your friends
For a third party auto insurance policy, the first party is you; the second party is the insurance company while the third party is everyone else. It covers you for claims made against you by other drivers after an accident.
If you are responsible for a crash, it is likely that you are going to pay for damages. Auto insurance policy covers all the claims made against you including injuries obtained by the third party.
However, under this insurance policy you cannot claim for the car you are driving as the insurance policy doesn�t cover the car you are driving. The insurance policy only covers the car you hit.
If you choose a registered insurance company, you will be able to escape such dramatic and unplanned costs. For example, if you hit a pedestrian on the road, the insurance company will pay the bills.
Note that the money to pay for damages comes from premiums. If premiums hasn�t been paid to the insurance company, there won�t be any compensation in case of accidents.
However, it is worthy to note that claims you make on an auto insurance company maybe limited. Some insurance companies may only cover the loss up to a certain amount say N1000,000. This simply means that if a vehicle you damaged is worth N4000,000 the insurance company will only provide N1000,000. So it is important to find the limit to loss the auto insurance company you choose covers before subscribing.
If you try to cheat the insurance company, you maybe arrested, so it�s good to be honest always. Be honest, don�t try to rip them off or stage an accident and you will be paid.
List of Auto Insurance Companies in US
American Automobile Association
Auto-Owners Insurance
Safe Auto Insurance Company
State Auto Insurance Group
Unitrin Direct Auto Insurance
Workmen�s Auto Insurance Company
List of Auto Insurance companies in Nigeria
Industrial & General Insurance plc
Cornerstone Insurance plc
Aiico Insurance Plc
Adic Insurance Ltd
Leadway Insurance
Zenith Insurance
Cheki
We are only explaining how auto insurance works and listing auto insurance company More Auto Insurance companies coming soon. kindly share to your friends
Can you get an Insurance Quote if you don't have car yet?
Insurance Auto Auctions and How They Work
Insurance auto auctions sell cars, trucks, bikes and also boats that have been damaged by collision; flooding; theft or fire or been subject to loss in some other way. At an insurance auto auction there might also be vehicles for sale that have been repossessed against defaulted payments. These auctions acquire stock directly from insurance companies in high volume so there is always plenty of choice.
All kinds of buyers take an interest in insurance auto auctions: exporters; dealers; small auto businesses that renovate and re-sale vehicles; and private individuals eager to find a bargain. Buyers qualify to take part in such auctions through licence but access to insurance auto auctions is easy via a registered and authorized online broker holding the relevant licensing.
Vehicles wind up at auction for all kinds of reasons. Fleet leased cars tend to go for auction once they have reached a certain mileage. Many of these vehicles have taken a beating in terms of wear and tear but many others are surprisingly unscathed!
Dealer trade-ins are also found at auction and while some cars, bikes and trucks are in pretty bad shape, others are perfectly suitable for several more years of service. Browsing through the sale lists, the damage on each vehicle is clearly described so that buyers know what they are getting and in what condition. This information also outlines what parts are required to repair and renovate each vehicle; thousands of parts and vehicles that are suitable for parts only are accurately listed.
Some insurance auto auctions will arrange transportation, with a pickup service and towing facilities to save outlay on storage and also ensure you get what you purchased as quickly as possible. An online broker will deal directly with insurance auto auctions and liaise on transportation and inspection services.
Of course the main motive for buying at auction is a reduction in price on the vehicle. Auctions deliver when it comes to getting a lot of car for the lowest possible cash outlay and a discerning buyer who is not interested in renovation or repair can buy a near perfect vehicle, every bit as desirable as anything to be found on a used car lot, for perhaps less than half the cost.
As the auto industry introduces more and more safety procedures, making them standard for inclusion in new vehicles, insurance repair becomes less viable and more vehicles are written off as a loss, even though they are in excellent condition apart from surface scratching or minor dents. These vehicles go to auction to be snapped up by dealers at amazing prices.
Gaining access to insurance auto auctions is a simple process: simply register with an online broker and away you go. Make sure you check out credentials and that the broker is properly registered and authorized to protect your own interests. The broker will then provide comprehensive lists of prospective bargains before expertly guiding you through the buying process safely and efficiently.
All kinds of buyers take an interest in insurance auto auctions: exporters; dealers; small auto businesses that renovate and re-sale vehicles; and private individuals eager to find a bargain. Buyers qualify to take part in such auctions through licence but access to insurance auto auctions is easy via a registered and authorized online broker holding the relevant licensing.
Vehicles wind up at auction for all kinds of reasons. Fleet leased cars tend to go for auction once they have reached a certain mileage. Many of these vehicles have taken a beating in terms of wear and tear but many others are surprisingly unscathed!
Dealer trade-ins are also found at auction and while some cars, bikes and trucks are in pretty bad shape, others are perfectly suitable for several more years of service. Browsing through the sale lists, the damage on each vehicle is clearly described so that buyers know what they are getting and in what condition. This information also outlines what parts are required to repair and renovate each vehicle; thousands of parts and vehicles that are suitable for parts only are accurately listed.
Some insurance auto auctions will arrange transportation, with a pickup service and towing facilities to save outlay on storage and also ensure you get what you purchased as quickly as possible. An online broker will deal directly with insurance auto auctions and liaise on transportation and inspection services.
Of course the main motive for buying at auction is a reduction in price on the vehicle. Auctions deliver when it comes to getting a lot of car for the lowest possible cash outlay and a discerning buyer who is not interested in renovation or repair can buy a near perfect vehicle, every bit as desirable as anything to be found on a used car lot, for perhaps less than half the cost.
As the auto industry introduces more and more safety procedures, making them standard for inclusion in new vehicles, insurance repair becomes less viable and more vehicles are written off as a loss, even though they are in excellent condition apart from surface scratching or minor dents. These vehicles go to auction to be snapped up by dealers at amazing prices.
Gaining access to insurance auto auctions is a simple process: simply register with an online broker and away you go. Make sure you check out credentials and that the broker is properly registered and authorized to protect your own interests. The broker will then provide comprehensive lists of prospective bargains before expertly guiding you through the buying process safely and efficiently.
5 steps to switching your car insurance companies
step 1: research and evaluate your coverage needs
Buying a new car, getting married, moving, or having a child � just to name a few life-changing scenarios � can all impact your coverage needs. And there's no shortage of coverage options, limits, and deductibles to choose from.
If you're looking for a policy recommendation, spend a few minutes with our handy Coverage Counselor�.
As a general rule, you'll typically want to get the most coverage that you can comfortably afford.
step 2: shop around
When you know what coverages you want, check out what insurance companies have to offer.
Compare your options with prospective insurers
Get a free quote to see what you'd pay for a policy.
Compare coverages, limits, and deductibles side by side � not just the policy price. That way, you compare apples to apples.
Find out about all your payment options.
Check for discounts (like our Switch & Save� or Claim-Free discounts) that might apply to you.
Research dependability
Verify the reputation of potential insurers by researching them on websites like A.M. Best. And let the record show that Esurance � a member of the Allstate family � is rated A+ (Superior) for financial strength.
Ask neighbors and (real-life or Facebook) friends about their experiences with certain companies.
Check on convenience
Since you never know when you might need to speak with someone, 24/7 customer service is a reassuring factor. This way, you can always count on speaking to a real person if you need to file a claim or have questions about your policy.
With some companies, like us, you can manage your policy, file claims, and track repairs online anytime.
See if a company has a well-regarded mobile app and an easy-to-use mobile site. These can help you manage your policy or file a claim down the road. Check out our mobile app here.
Additional benefits.
If there's nothing to separate similar-sounding insurers, consider other factors that matter to you, like the company's community involvement or environmentally friendly policies. Visit their Facebook pages and Twitter feeds to get a feel for the community you're about to join.
step 3: make the switch
With the groundwork finished, it's time to put your plan in action.
Once you have a quote on a policy that best suits your needs, buy your new car insurance policy before terminating your old policy.
In many states, when you drop your car insurance, your insurer is required to report it to your state's motor vehicle department. Make sure your new car insurance policy starts before or on the same day that your old insurance ends. Even a one-day lapse in coverage could lead to increased rates in the future.
If you have any questions at this stage, don't hesitate to pick up the phone and talk to an agent. At Esurance, you can speak to one of our real-life coverage counselors 24 hours a day.
step 4: cancel or don�t renew your previous coverage
A few things to consider when you call your prior insurer to cancel or to let them know you won't be renewing your policy:
Ask about cancellation fees. If your term's set to expire, you should be free of any cancellation charges unless you choose to cancel it before the policy term ends.
Schedule the cancellation date to be no later than the effective start date of your new coverage to avoid a lapse in coverage.
Ask for confirmation that your policy has been canceled and won't be automatically renewed.
Your prior insurer will walk you through the entire cancellation process. If you're switching your policy to a new car insurance company mid-term, you may be entitled to a premium refund depending on your payment plan.
step 5: print your ID cards and celebrate
With all that behind you, make sure you swap your old insurance ID cards for the new ones by the time your new policy kicks in. Keep one handy in each car's glove box (unless ID cards aren't required in your state).
Buying a new car, getting married, moving, or having a child � just to name a few life-changing scenarios � can all impact your coverage needs. And there's no shortage of coverage options, limits, and deductibles to choose from.
If you're looking for a policy recommendation, spend a few minutes with our handy Coverage Counselor�.
As a general rule, you'll typically want to get the most coverage that you can comfortably afford.
step 2: shop around
When you know what coverages you want, check out what insurance companies have to offer.
Compare your options with prospective insurers
Get a free quote to see what you'd pay for a policy.
Compare coverages, limits, and deductibles side by side � not just the policy price. That way, you compare apples to apples.
Find out about all your payment options.
Check for discounts (like our Switch & Save� or Claim-Free discounts) that might apply to you.
Research dependability
Verify the reputation of potential insurers by researching them on websites like A.M. Best. And let the record show that Esurance � a member of the Allstate family � is rated A+ (Superior) for financial strength.
Ask neighbors and (real-life or Facebook) friends about their experiences with certain companies.
Check on convenience
Since you never know when you might need to speak with someone, 24/7 customer service is a reassuring factor. This way, you can always count on speaking to a real person if you need to file a claim or have questions about your policy.
With some companies, like us, you can manage your policy, file claims, and track repairs online anytime.
See if a company has a well-regarded mobile app and an easy-to-use mobile site. These can help you manage your policy or file a claim down the road. Check out our mobile app here.
Additional benefits.
If there's nothing to separate similar-sounding insurers, consider other factors that matter to you, like the company's community involvement or environmentally friendly policies. Visit their Facebook pages and Twitter feeds to get a feel for the community you're about to join.
step 3: make the switch
With the groundwork finished, it's time to put your plan in action.
Once you have a quote on a policy that best suits your needs, buy your new car insurance policy before terminating your old policy.
In many states, when you drop your car insurance, your insurer is required to report it to your state's motor vehicle department. Make sure your new car insurance policy starts before or on the same day that your old insurance ends. Even a one-day lapse in coverage could lead to increased rates in the future.
If you have any questions at this stage, don't hesitate to pick up the phone and talk to an agent. At Esurance, you can speak to one of our real-life coverage counselors 24 hours a day.
step 4: cancel or don�t renew your previous coverage
A few things to consider when you call your prior insurer to cancel or to let them know you won't be renewing your policy:
Ask about cancellation fees. If your term's set to expire, you should be free of any cancellation charges unless you choose to cancel it before the policy term ends.
Schedule the cancellation date to be no later than the effective start date of your new coverage to avoid a lapse in coverage.
Ask for confirmation that your policy has been canceled and won't be automatically renewed.
Your prior insurer will walk you through the entire cancellation process. If you're switching your policy to a new car insurance company mid-term, you may be entitled to a premium refund depending on your payment plan.
step 5: print your ID cards and celebrate
With all that behind you, make sure you swap your old insurance ID cards for the new ones by the time your new policy kicks in. Keep one handy in each car's glove box (unless ID cards aren't required in your state).
Boost your income by thousands of pounds using a simple trick allowed under new pension rules
Millions of workers coming up to retirement could boost their income by thousands of pounds using a simple trick allowed under new pension rules.
In some cases, this little ruse could boost your take-home earnings by 41 per cent - a perk normally reserved for the super-rich.
So, how does it work? Quite simply, it involves putting every spare penny you earn into a pension � particularly for those who have paid off their mortgage and no longer have children to provide for.
You could even use your cash savings, as the perk you�d get would far outweigh any interest the High Street can pay.
It might mean a year of living frugally, but it could well be worth it for any of the 3.5 million baby-boomers hitting retirement age in the next five years.
Normally, a basic-rate taxpayer would pay �200 tax on every �1,000 earned. A higher rate taxpayer would pay �400.
But instead of putting the remaining �800 (or �600 for a higher-rate taxpayer) into a bank account, if you put it into a pension you�d get all the tax back.
So, if you paid in �800, then you�d get �1,000 in your pension if you�re a basic- rate taxpayer.
All you do then is take it out a year later, or whenever you retire. The perk comes because under new pension rules, you�ll be able to make each withdrawal with a quarter tax-free. So, only �750 of every �1,000 is taxable.
A basic-rate taxpayer would then pay �150 tax on the remaining �750. In total, they would have �850. That�s an extra �50 income for every �1,000 invested, compared with if they had simply pocketed the money initially.
A higher-rate taxpayer would pay �300 tax on the �750 taxable amount, giving them a total of �700. That�s an extra �100 on every �1,000.
But there is a further boost for those who are higher-rate taxpayers when they are working and become basic-rate taxpayers when they retire.
All you�ve really done is deferred taking your income for a year or two. But by doing so, you�ll get �850 for every �1,000 you earned rather than the �600 if you took it now. That�s an extra 41 per cent income.
This has become possible only since the pension rule changes. Previously, most people would have been forced to buy an annuity with the taxable sum.
But new modern pensions known as self-invested pension plans (Sipps) will allow you to take out the money almost instantly.
For this to work, it will need to be one of these types of pensions with very low or no charges, as older insurance-style schemes and many employer schemes won�t let you have the money so easily.
We�re not suggesting you invest the money or splash it on the stock market. You just need to put it into a Sipp and leave it sitting in cash.
Then, when you retire a year or two later, take it out again. Suitable Sipps include those run by Hargreaves Lansdown and Fidelity Personal Investing.
Hargreaves would make no charge if the money was held in cash, but there would be a �250 charge if it was not left for at least a year. With added interest, a basic-rate taxpayer could walk away with �851.40 after a year and a day.
Looking forward: New modern pensions known as self-invested pension plans (Sipps) will allow you to take out the money almost instantly
Fidelity Personal Investing has a 0.35 per cent basic annual charge, but this is effectively cancelled out by the 0.35 per cent interest it pays on cash. It makes no charge on withdrawals. Many others have much higher administration charges, which would undermine the tax benefits.
For example, Barclays Stock- brokers charges �186 a year including VAT; Charles Stanley �120 a year including VAT.
Others have charges for administration, income payments or setting up the Sipp.
You can put �40,000 a year including the tax relief into your pension. You may not feel that you can sacrifice so much from your pay packet, but you are allowed to use money in your savings account, too � and that is currently earning a pittance.
The �50 boost you get as a basic-rate taxpayer is equivalent to 6.25 per cent interest.
For people who are higher-rate taxpayers now, but will drop to basic rate on retirement, it�s more complicated, but it�s the equivalent of earning 41 per cent interest.
There are some key things to remember. Any income you take from this Sipp will be added to your other income to decide how much tax you must pay that year.
If you�re very close to becoming a higher-rate taxpayer, it could tip you into the 40 per cent bracket.
Therefore, you may need to spread it over a few years to avoid paying higher-rate tax. When it comes to contributing, you must have paid the tax to get tax relief.
Those who don�t pay tax can contribute up to �2,880-a-year and receive a top-up to create a pension of �3,600. This can be useful for non-working spouses.
One key group should not do this because it would leave them worse off: those who expect to be higher-rate taxpayers when they retire, but currently pay basic-rate tax.
This may be the case with people who were in highly paid jobs, but are easing towards retirement in lower-paid or part-time positions.
In some cases, this little ruse could boost your take-home earnings by 41 per cent - a perk normally reserved for the super-rich.
So, how does it work? Quite simply, it involves putting every spare penny you earn into a pension � particularly for those who have paid off their mortgage and no longer have children to provide for.
You could even use your cash savings, as the perk you�d get would far outweigh any interest the High Street can pay.
It might mean a year of living frugally, but it could well be worth it for any of the 3.5 million baby-boomers hitting retirement age in the next five years.
Normally, a basic-rate taxpayer would pay �200 tax on every �1,000 earned. A higher rate taxpayer would pay �400.
But instead of putting the remaining �800 (or �600 for a higher-rate taxpayer) into a bank account, if you put it into a pension you�d get all the tax back.
So, if you paid in �800, then you�d get �1,000 in your pension if you�re a basic- rate taxpayer.
All you do then is take it out a year later, or whenever you retire. The perk comes because under new pension rules, you�ll be able to make each withdrawal with a quarter tax-free. So, only �750 of every �1,000 is taxable.
A basic-rate taxpayer would then pay �150 tax on the remaining �750. In total, they would have �850. That�s an extra �50 income for every �1,000 invested, compared with if they had simply pocketed the money initially.
A higher-rate taxpayer would pay �300 tax on the �750 taxable amount, giving them a total of �700. That�s an extra �100 on every �1,000.
But there is a further boost for those who are higher-rate taxpayers when they are working and become basic-rate taxpayers when they retire.
All you�ve really done is deferred taking your income for a year or two. But by doing so, you�ll get �850 for every �1,000 you earned rather than the �600 if you took it now. That�s an extra 41 per cent income.
This has become possible only since the pension rule changes. Previously, most people would have been forced to buy an annuity with the taxable sum.
But new modern pensions known as self-invested pension plans (Sipps) will allow you to take out the money almost instantly.
For this to work, it will need to be one of these types of pensions with very low or no charges, as older insurance-style schemes and many employer schemes won�t let you have the money so easily.
We�re not suggesting you invest the money or splash it on the stock market. You just need to put it into a Sipp and leave it sitting in cash.
Then, when you retire a year or two later, take it out again. Suitable Sipps include those run by Hargreaves Lansdown and Fidelity Personal Investing.
Hargreaves would make no charge if the money was held in cash, but there would be a �250 charge if it was not left for at least a year. With added interest, a basic-rate taxpayer could walk away with �851.40 after a year and a day.
Looking forward: New modern pensions known as self-invested pension plans (Sipps) will allow you to take out the money almost instantly
Fidelity Personal Investing has a 0.35 per cent basic annual charge, but this is effectively cancelled out by the 0.35 per cent interest it pays on cash. It makes no charge on withdrawals. Many others have much higher administration charges, which would undermine the tax benefits.
For example, Barclays Stock- brokers charges �186 a year including VAT; Charles Stanley �120 a year including VAT.
Others have charges for administration, income payments or setting up the Sipp.
You can put �40,000 a year including the tax relief into your pension. You may not feel that you can sacrifice so much from your pay packet, but you are allowed to use money in your savings account, too � and that is currently earning a pittance.
The �50 boost you get as a basic-rate taxpayer is equivalent to 6.25 per cent interest.
For people who are higher-rate taxpayers now, but will drop to basic rate on retirement, it�s more complicated, but it�s the equivalent of earning 41 per cent interest.
There are some key things to remember. Any income you take from this Sipp will be added to your other income to decide how much tax you must pay that year.
If you�re very close to becoming a higher-rate taxpayer, it could tip you into the 40 per cent bracket.
Therefore, you may need to spread it over a few years to avoid paying higher-rate tax. When it comes to contributing, you must have paid the tax to get tax relief.
Those who don�t pay tax can contribute up to �2,880-a-year and receive a top-up to create a pension of �3,600. This can be useful for non-working spouses.
One key group should not do this because it would leave them worse off: those who expect to be higher-rate taxpayers when they retire, but currently pay basic-rate tax.
This may be the case with people who were in highly paid jobs, but are easing towards retirement in lower-paid or part-time positions.
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