Pensions - Important Changes

New rules applying to ALL pension schemes from 6 April 2006

Maximum you can contribute each year

• The limit on your yearly contributions to ALL registered pension schemes is your earnings in any tax year up to £215,000. If you're not earning but can contribute to a pension, the maximum you can contribute in each year is £2,808 (made up to £3,600 with basic rate tax relief).
• This means that you can top up your occupational pension with AVCs, stakeholder and personal pensions up to the yearly limit and the earnings restriction of £30,000 a year for stakeholder pensions is abolished. So you can contribute to a stakeholder or personal pension in addition to your occupational pension.
• There is also a lifetime allowance limiting how much you can accumulate (free of income tax) in all the pension funds you have built up. In 2006/07 the lifetime allowance is £1.5 million. The allowance will be increased each year in line with inflation.
• Salary-related pension scheme benefits will be given a value which will count towards the £1.5 million lifetime allowance. You will have to pay tax on any excess over the £1.5m allowance.
• If you wish, you can take a maximum of one quarter of ALL the pension funds you have built up (including AVCs and FSAVCs) up to the lifetime allowance of £1.5mn, as a tax-free lump sum. This also applies to any Protected Rights portion of your pension funds.
• The old limits for stakeholder and personal pensions are abolished from 6 April 2006.

If you are in any doubt about your pension arrangements, or you do not understand the complexities of the available schemes, then talk to us at Surrey Financial Advice. We can help guide you through the maze, get a basic understanding of your best options and help you to arrange them if required. There are now potentially quite large advantages to be gained from a pension arrangement, unlike any other form of investment in the UK, but there are also some disadvantages which you should be aware of before you make your decision.

Remember, with Surrey Financial Advice, any initial consultation is free of charge (apart from a cup of coffee, perhaps) and you are under no obligation to proceed.   [Contact us]