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Pensions and Savings

 

Pension Schemes

Standard Lifetime Allowance
Tax Year Amount (£)
2006-07 £1,500,000
2007-08 £1,600,000
2008-09 £1,650,000
2009-10 £1,750,000
2010-11 £1,800,000

Member contributions

There is no limit on the amount that an individual can contribute to a registered pension scheme. If you are a UK resident aged under 75 you may receive tax relief on your contributions to a registered pension scheme. Tax relief is limited to relief on contributions up to the higher of

  • 100 per cent of your UK taxable earnings
  • £3,600

Any amount of contributions paid over the annual allowance will be liable to the annual allowance charge.

Annual Allowance
Tax Year Amount (£)
2006-07  £215,000
2007-08 £225,000
2008-09 £235,000
2009-10 £245,000
2010-11 £255,000

Notional Earnings Cap

Before 6 April 2006 the rules of many pension schemes limited the amount of benefits that could be provided or contribution paid by reference to the permitted maximum under s590C ICTA 1988. Although section 590C ICTA 1988 was repealed on 6 April 2006 the permitted maximum can continue to apply to registered pension schemes for a period up to 5 April 2011 because of regulation 4 of The Registered Pension Schemes (Modification of the Rules of Existing Schemes) Regulations 2006 – SI 2006/364.

If section 590C had not been repealed on 6 April 2006, a Treasury order would have stated the permitted maximum figure for the tax years as follows;

Tax Year Amount (£)
2006-07  £108,600
2007-08

£112,800

2008-09 £117,600
2009-10 £123,600
2010-11 £123,600

Tax charges on payments from registered pension schemes

There are a number of special tax charges that apply to special payments made from registered pension schemes. These are listed below. The normal Income Tax rates apply to ordinary pensions payments made from pension schemes.

Charges Rates
Lifetime allowance charge 55% - if the amount over the lifetime allowance is paid as a lump sum
25% - if the amount over the lifetime allowance is not taken as a lump sum
Annual allowance charge 40%
Unauthorised payments charge 40%
Unauthorised payments surcharge 15%

Short service refund lump sum charge

Years to 2009-10
20% on first £10,800, 40% on amounts over £10,800
Short service refund lump sum charge From 2010-11
20% on first £20,000, 50% on amount over £20,000
Special lump sum death benefits charge 35%
Authorised surplus payments charge 35%
Scheme sanction charge 15% - 40%

 

Savings

The 10% starting rate of Income Tax includes savings income. Where an individual has savings income in excess of the starting rate limit they will be taxed at the lower rate of 20% up to the basic rate limit and at the higher rate of 40% for income above the basic rate limit.

The rates of tax for dividends are 10% for income up to the basic rate limit and 32.5% for income above the basic rate limit.