Barclays Wealth

General information about pension plans

There are a number of rules that can influence your retirement planning. Here's a basic overview of how they could affect you:

• There's no limit on the amount of money you can save in a pension plan, although there are limits on the amount of tax relief you can claim on contributions. Tax relief on contributions only applies to amounts up to the relevant Annual Allowance limit (currently £50,000 per tax year).
• Any unused annual allowances from the three preceding tax years (capped at £50,000 per tax year) can sometimes be carried forward to the current year.
• Taxpayers can claim income tax relief at their highest tax rate on their pension contributions, up to 100% of annual earnings or £50,000* a year (for the 2011/12 tax year), whichever is lower.
• So for every £800 of your earnings net of tax you put into your pension in 2011/12, the government will add tax relief worth at least £200, which takes the total investment into your pension fund to a gross £1,000.
• And higher rate taxpayers can gain further relief of up to 20% (2011/12), or £200 in the above example, through their self-assessment tax returns - provided the tax relief is not to be restricted in accordance with the transitional regulations for high earners*.
• And higher rate taxpayers can gain further relief of up to 20% (2011/12), or £200 in the above example, through their self-assessment tax returns Additional rate taxpayers can gain further relief of up to 30% in this way.
• Even non-taxpayers and non-earners get basic rate tax relief on pension contributions of up to £2,880 net per tax year, taking the value of these contributions up to a maximum of £3,600 gross each year, after tax relief.
• It's even possible to contribute to a pension for a child, or a spouse or civil partner - or someone else of your choice - again up to £2,880 net per year (£3,600 gross), or up to 100% of any employment earnings they may have if this figure is higher.
• Your pension fund grows free of income tax and capital gains tax.
• You may be able to contribute to more than one pension plan.
• You are not able to draw retirement benefits until age 55.
• 25% of your pension fund can normally be taken as a tax-free lump sum, up to certain limits.
• You may be able to enjoy flexible retirement. For those in an occupational pension scheme you can continue working while drawing your pension if your scheme rules allow it.
• A 'lifetime allowance' applies to the total value of your fund when you start drawing benefits or turn 75. In 2011/12, the lifetime allowance is £1.8 million but reducing to £1.5 million from April 2012.
• If your fund is more than the lifetime allowance when you come to take your pension, any funds over the allowance may be subject to a tax charge of 55% for a lump sum, or 25% if taken as a pension.

Tax treatment will depend on an individual's personal circumstances and may change in the future. Barclays Wealth does not provide tax advice. If in doubt we recommend you obtain your own independent tax and legal advice tailored to your individual circumstances.

Find out more about planning for your retirement

To discover how Barclays Wealth could help you save for your retirement, please contact us and we'll be in touch as soon as possible.

Legal information