yearly contributions
You can invest up 100 per cent of your earnings, subject to a
limit of £235,000 in the tax year 2008-09. This limit will rise
each year by £10,000 to reach £255,000 by tax year 2010-11.
Since April 6 2006, it has been possible to
pay into a personal pension, in addition
to any other pension schemes you wish, including
company pension schemes, providing you do not contribute more than
100 per cent of your earnings in total.
Is there a limit to how much I can
hold in a stakeholder pension?
There is a ‘lifetime allowance’ which is the
maximum you can hold in total in all your pension schemes and still
enjoy the tax privileges associated with pensions.
If the total value of all your pensions
exceeds this limit, there will be a charge on the excess over
£1.65m (tax year 2008-09) of 25 per cent if the excess is used to
provide income, and a 55 per cent charge if you take the excess
funds as cash.
The lifetime allowance each year are as
follows:
|
Allowance
|
Year
|
|
£1.5m
|
2006-07
|
|
£1.6m
|
2007-08
|
|
£1.65m
|
2008-09
|
|
£1.75m
|
2009-10
|
|
£1.8m
|
2010-11
|
There are complex transitional arrangements
for people who had more than £1.5m in total in their pensions
before 6 April 2006 and if you are in this position, you are
strongly recommended to take specialist independent financial
advice to protect your position, if you have not already done
so.
How do I calculate the value of my
pensions for the purposes of the lifetime allowance
For money purchase (also known as defined
contribution) schemes, such as any type of personal pension, you
use the fund value. This means you need to add up the total fund
value of any group personal pensions, stakeholders, Sipps or other
personal pensions you hold.
For final salary schemes, you multiply each £1
of annual pension you will receive at retirement by £20 to
calculate the fund value for lifetime allowance purposes. For
example, a £30,000 pa pension would be valued at £600,000 (£30,000
x 20 =£600,000).