Budget 2008

Registered Pension Schemes - Budget 2008 - GT

Registered Pension Schemes

Tax Year Annual allowance* Lifetime allowance
  £ £
2007/2008 225,000 1,600,000
2008/2009 235,000 1,650,000
2009/2010 245,000 1,750,000
2010/2011 255,000 1,800,000

Thereafter reviewed every five years

Annual allowance

  • Personal contributions to all registered pension schemes.
  • Tax relief on the lower of 100%of annual earnings† or the annual allowance.

Employer contributions

  • Unlimited.
  • Contributions in excess of annual allowance charged to tax at 40% on the member.

Measurement

  • Measured against pension contributions:
    • defined as total contributions to money purchase plans, plus annual increase in defined benefit rights
    • annual increase in defined benefit rights valued at £10 for every£1 pension
    • includes additional voluntary contributions to money purchase schemes
    • excludes contracted-out rebates
    • excludes additional voluntary contributions to buy added years.
  • None in year all pension benefits are taken or in year of death.

Lifetime allowance

  • Based on value of benefits taken at crystallisation.
  • Scheme funds in excess of the lifetime allowance subject to a charge when benefits paid out:
    • 55%if excess funds are taken as cash.
    • 25%, plus income tax at marginal rates, if taken as income.
  • Includes the value of contracted-out rights.
  • Defined benefits rights valued at £20 for every £1 pension.
  • Pensions in payment at 6 April 2006 valued at £25 for every £1 pension.
  • Pension fund withdrawal in payment at 6 April 2006 based on maximum income available at last review date valued at £25 for every £1 pension.

* Total of personal and employer contributions.
† If no earnings, £3,600 a year and for relief at source arrangements only.

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