There’s one thing that’s certain with pensions: by the time you come to draw yours, the rules will have changed several times. In the 2011/12 tax year, the maximum tax-allowable contribution to pension schemes has been cut to £50,000, with some complicated rules about using the limit of the previous three years if you didn’t pay £50,000 in each of them (even though the maximum was different under the previous rules).
If you retire with a pension pot bigger than your ‘lifetime allowance’, there’s a tax charge. In 2011/12, the limit is £1.8m. On 6 April 2012 it falls to £1.5m – still a lot of money, but the charge will be significant for someone who has a pot larger than that. You can apply for ‘fixed protection’ which avoids the charge on up to £1.8m, but restricts the amount you can contribute to a pension fund afterwards.
If you want some help understanding what you can put into pension funds, or whether your pension fund might trigger the lifetime allowance charge, we can help.