HM Treasury’s United Kingdom Budget 2007

Grant Thornton

Grant Thornton

Registered Pension Schemes

Tax Year Annual allowance1 Lifetime allowance
  £ £
2006/2007 215,000 1,500,000
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 earnings2 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

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

Lifetime Allowance

  • Based on value of benefits taken at crystalisation.
  • 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.

The figures shown here are subject to ammendment as the Finance Bill passes through Parliament.

This information has been prepared only as a topical guide to tax and personal financial matters. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material contained in this publication.

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