Saving for a pension offers wide-ranging opportunities at all stages in your working life. New freedoms and flexibility about how you can access your pension savings once you have reached the minimum retirement age has brought new possibilities to the table, making pensions an attractive and tax-efficient element in any financial plan.
Contributions to a pension scheme are eligible for tax relief, up to the Annual Allowance. What this means is that for every £8 you put into your pension, the Government will add another £2 in tax relief, if you are a basic rate taxpayer. The Annual Allowance for the 2017-18 tax year is £40,000 for most taxpayers although those with adjusted incomes over £150,000 will have a lower allowance. The allowance will also be reduced if you have started to take pension benefits from your fund.
There are 3 basic types of pension scheme you can adopt to hold your pension savings:
o Stakeholder Pensions are a form of personal pension facility available to anyone. There is a cap on charges for a stakeholder scheme but investment choices may be limited.
The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The tax treatment of investments depends on individual circumstances and is subject to change.