Pension Premiums and Withdrawals
There is no financial limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual’s UK relevant earnings or £3,600 (gross). These three allowances may need to be taken into account: Default annual allowance (£40,000); Money Purchase annual allowance (£10,000); and Alternative annual allowance (£30,000).
The maximum age for tax relief is 74. The lifetime allowance charge applies to cumulative benefits exceeding £1.25m*. Inheritors can access pension funds worth up to £1.25m tax-free where savers die before reaching 75. Pensions inherited after the saver reaches 75 will be subject to recipient’s marginal rate of tax.
From April 2015 people aged 55 or over can withdraw any sum from their Defined Contribution pension savings. On most withdrawals 25% of the total will be tax-free with the rest subject to income tax at the pensioner’s marginal rate.
*Subject to transitional protection for excess amount.