Personal Pension

If you are an employee who is a member of an occupational pension scheme, you may be able to take out a personal pension as well. From April 2006, you can save as much you like into any number of pension schemes. This applies to both personal and occupational schemes. There is no upper limit to the total amount of pension savings that you can build up, although there are limits on the amount of tax relief you will get.

A personal pension scheme will provide one or more of the following benefits:-

• a pension during retirement, which can start at any age between 55 and 75
• a tax-free lump sum on retirement of up to 25% of the pension fund which has been built up from your contributions and interest and/or bonuses paid by the pension provider
• a pension payable to your widow, widower, civil partner or other dependant(s)
• a tax-free lump sum, payable if you die before retirement, to your widow, widower, civil partner or other dependant(s).

A personal pension scheme may be contracted out of additional pension. This means that you do not pay contributions into additional pension and will not receive a top up to your basic state retirement pension unless you are entitled to additional pension from another employer.

If the pension scheme is contracted out of additional pension, HMRC will make contributions into the scheme. If the pension is not contracted out of additional pension, you will continue to pay contributions into additional pension and will be entitled to a top up to your basic state retirement pension in addition to your personal pension.