Personal and Stakeholder pensions.
Personal pensions, introduced on 1 July 1988, originally aimed to give people who were not part of a company pension scheme their own portable pension, designed on a money purchase basis although since April 2001 certain individuals who are members of company pension schemes can also take out personal pensions.
Legislation for personal pensions and stakeholder pensions are identical (only the charges and product terms are set for stakeholder).
Annual Allowance.
Since A-Day, annual pension
contributions have a new limit attracting full tax relief.
This limit is
the greater of £3,600 and 100% of salary, subject to the annual
allowance (£235,000 in the 2008/2009 tax year). Any contribution over
the annual allowance will be subject to a tax charge. We will explain
this in further detail later in this bulletin.
Lifetime Allowance.
As well as an annual allowance charge, there is a possible lifetime
allowance charge if total pension funds exceed the lifetime allowance at
when pension benefits are taken. The lifetime allowance is £1.65 million
in 2008/2009 rising to £1.8 million in the 2010/2011 tax year.
The lifetime allowance charge is applied to the excess over the
allowance. This can apply in two different ways or both depending on how
the excess is taken. The individual charges are;
• 25% if taken as income, and
• 55% if taken as a lump sum
It is unlikely that there will be much difference because, if someone
takes the excess as income, he will be charged income tax on top of this
tax charge, more than likely at 40%.
Benefits.
You can take benefits between ages 50 and 75. Normally these will be in the form of 25% of the fund as tax free cash, and the rest applied to produce an annual pension although other alternatives are now available.
Level and bases of, and reliefs from taxation are subject to change.
