Personal pensions are designed for those who do not have access to a company pension. Unlike a company pension there is no final salary version so the final value of your pension will depend on your contributions, the charges levied by the fund managers and the performance of the fund in which the money is invested.
You can contribute to as many pension plans as you want. In addition, there is now no upper limit on the total contribution that can be paid although there is a limit on the amount of contribution that can benefit from tax relief.The limit is currently 100% of earnings up to a maximum of £50,000.
Unearned income, such as investment income and capital gains, do not qualify as 'relevant UK earnings'.
Your contributions benefit from tax relief and will be deducted from your take home pay net of basic rate tax. The tax is then reclaimed by the scheme administrator and allocated to your pension. If you are entitled to a higher rate tax relief this will need to be done via your self assessment tax return.
The contributions you make can be varied each year to suit your financial circumstances.
A personal penion is not tied to any job or employer - you can keep it wherever you go in the country and whatever you do.
Levels, bases of relief from taxation may be subject to change.
What the FSA Say
The FSA says: “Your retirement can last 20 or 30 years – maybe longer, so you need to be prepared – you may be living on your retirement income a long time. Try to think about how much income you’ll need. Work out how much you’ll want to spend (using today’s price levels). If you decide to use a pension to save for your retirement, it may be a good idea to start one as soon as possible. If you put it off by just a few years, you could end up with a much smaller pension.
- Find out if your employer offers a pension scheme and whether they contribute to it.
- You cannot take your money out of a pension until you are at least 55.
- Many schemes give you a statement each year with details of your possible income at retirement.”
Authorised and regulated by the Financial Services Authority
(SIB No: 133515)