Pension Simplification (A DAY)
Lifetime savings limits
Do you need to register by 5 April 2009?
Following 'A' Day on 6 April 2006, new rules now place an overall lifetime limit on tax-advantaged pension funds of £1.6m (2007/08).
That limit is to increase each year until 2010, when it will reach £1.8m. There is a tax charge for value in excess of the limit at retirement and for excess contributions in a year over the annual limit, which this year is £225,000.
Transitional arrangements protect those who have already reached the 'lifetime' savings limit at 5 April 2006, but protection needs to be registered by 5 April 2009.
|Tax charge on excess||40%||40%||40%||40%|
|Tax charge(excess paid as annuity)||25% on excess value, then up to 40% on annuity|
|Tax charge (paid as lump sum)||55% on excess value|
For tax relief you are allowed to contribute 100% of your earnings up to a maximum of £225,000 (2007/2008). If your earnings are below £3,600 or you do not have any earnings you are allowed to contribute up to £3,600 per annum gross (£2,808 net).
This has been introduced to charge tax on the value of all of your pension benefits if they are over a certain amount. This is called the Lifetime Allowance and will be set at £1.6 million in the tax year 2007/2008. This amount will rise to £1.8 million by 2010/2011
The earliest you can take your benefits will be from age 55 from 6th April 2010. If you are eligible to take benefits from age 50 this can only be done before this date.