Budget 2006

Registered Pension Schemes

From 6 April 2006 only

Thereafter reviewed every five years

Annual allowance

Personal contributions to all registered pension schemes

• tax relief on the lower of 100% of annual earnings¹ 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 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.