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What is a pension?
A pension is a tax efficient savings vehicle for your retirement. It offers tax relief on your contributions by giving tax relief at source. However if you become a higher rate taxpayer you will be able to reclaim a further 20% via your Accountant. At retirement age, under present legislation, you have the option to take up to 25% of your fund as a tax free lump sum, the remainder must be used to purchase an annuity, which is a pension paid monthly for life. The plan allows you to add regular contributions and lump sum contributions at any time (subject to annual Inland Revenue limits and policy conditions).
You may contribute the higher of your annual salary or £3,600 up to a maximum of £235,000 per annum in the 2008/09 tax year. Your overall pension pot may be up to £1,650,000 in your lifetime and you may take up to 25% of your fund as a tax-free cash lump sum. The remainder you must use to purchase an annuity, which provides a monthly income. You may take your pension from age 55 (from 2010).
