Personal Pension Plans
A Personal Pension helping you save towards a successful retirement
Personal pensions enable you to build up long-term investment value so that you may accrue sufficient income to provide for your retirement. The government also encourages you to save by offering tax relief on your contributions.
We can help you navigate the various obstacles that include a lifetime ceiling which is the amount you can save and benefit from tax relief. This is called the lifetime allowance and is a limit on the value of your overall pension fund. In this current tax year it is restricted for individuals to £1.8 million.
Income Limits
If your income is £150,000 or higher, commencing 6 April 2011 tax relief will be tapered down to 20 per cent in excess of £180,000. So if this applies to your particular situation you should talk to the pension advice team sooner rather than later.
If you have a pre-tax income which is in excess of £130,000, which includes your own pension contributions and charitable donations, since 9 December 2009 you are also now required to establish the value of your pension benefit funded by your employer. An individual with a gross income, including their pension benefit, which exceeds £150,000, is subject to tapered relief.
For every pound you contribute to your scheme, your pension provider currently claims tax back from the government at the basic rate of 20 per cent. This means that for every £80 you pay into your pension, you end up with £100 in your pension.
Pension Tax Relief
Higher rate taxpayers can receive 40 per cent tax relief on contributions. This relief is only available up to the amount of the income that is taxable at 40 per cent. But the way that the money is given back to is different. The initial 20 per cent is claimed back from HM Revenue & Customs by the pension scheme in the same way as for a basic rate taxpayer. But it's then up to the individual to claim back the additional 20 per cent through their annual tax return.
For the tax year 2010/11 the annual allowance is £255,000. Savings above the annual allowance and a separate lifetime allowance are subject to tax charges.
Other tax advantages to having a personal pension scheme include investing your money in a pension fund free of tax. Also any increase in the scheme's asset value between what you contribute and its eventful value is called a capital gain and is also tax-free.
At the point you take your benefits you may be able to draw out up to 25 per cent of the pension fund value as a tax-free lump sum.
You can also contribute into someone else's personal pension, for example a spouse, civil partner, child or grandchild. Basic rate tax relief is automatically added and has no impact on your own tax position. If they have no income, you could contribute up to £2,880 a year (which gross is £3,600 with tax relief).
Independent Pension Advice
To discuss your pension requirements please contact the independent pension advice team from one our partner firms for a free initial consultation.
Pension Guides
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