A personal pension plan is a very flexible way of saving - you can make regular monthly or yearly payments, as well as one-off payments. Because of the tax benefits, the Government sets limits on the amount of tax relievable contributions you can pay into the plan. Non-earners can pay up to £3600 a year gross into registered pension schemes and receive tax relief on yearly gross contributions to all registered pension schemes up to whichever is the greater of 100% UK taxable earnings and £3600.
Where appropriate it will enable you to contract out of the State Second Pension (S2P).
You can change or even stop your contributions, or transfer your savings into another pension fund, at any time. If you stop paying contributions into your plan or take a contribution break, your pension may be lower than shown in your personal illustration.
Retirement
You can set your retirement date at any age between 50 (rising to 55 on 6 April 2010) and 75. However, you don't have to retire at that time - it's simply the date at which you stop paying into the fund and can use the money to buy an annuity, which gives you a regular income for the rest of your life. You can also choose to use the money to buy an unsecured pension (where your income isn't guaranteed) or an alternatively secured pension if you're over 75.
Tax-free lump sum
You can also take up to 25% of the fund as a tax-free lump sum, although this will reduce your pension payments. In some circumstances you may be entitled to more than this. Your financial adviser will be able to tell you if this applies to you.
This information is based on our understanding of current taxation law and Revenue practice, which may change.
Fund choice
You can choose to invest your pension plan in funds from a number of highly regarded and respected fund management companies.
Further information... Who should I talk to?
Speak to your financial adviser to find out more. If you don't have an adviser, the IFA Promotion Service or the Society of Financial Advisers can help you find one.
