Pensions A-Day

New simplified pension rules came into effect as of the 6 April 2006.

For the first time, everyone will be able to save in more than one pension scheme at the same time.  You will get tax relief on contributions on the lower of 100% of your annual earnings and £215,000.

Even if you are not a tax payer, you can still get tax relief on pension contributions.  You can put in up to £2,808 in any one tax year and the Government will top this up with another £792.

Under the new provision, it is possible to take up to 25% of your pension fund as a tax free lump sum.

The drawback with the new legislation is that if your pension pot is more than the ‘lifetime allowance’ when you come to take your pension, you may be subject to a tax charge at that time.  But this will only apply if your total pension savings are in excess of £1.5 million.