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This 'lifetime allowance' was set at £1.6M for 2007–08 and was increased and then decreased over time. [2] Funds accumulated in excess of the lifetime allowance are subject to a penalty tax charge of 55%. Transitional protection provisions were made for individuals who had already accumulated pension funds in excess of this amount.
An individual can, each year, put in an amount up to the lower of 100% of their earned income or the prevailing annual allowance. The annual allowance for the tax year 2008/09 was £235,000, but it was reduced to £50,000 for tax years from 2011/12 and was further reduced to £40,000 from the 2014-15 tax year. [1]
If the fund value exceeds the lifetime allowance, the amount above the lifetime allowance will be taxed at 55%. The lifetime allowance was £1.8 million in the 2010–11 and 2011-12 tax years. From April 2012 the lifetime allowance fell to £1.5 million but there are provisions for those previously relying on the higher limit.
Graduated Pension or Graduated Retirement Benefit: This was earned between 6 April 1961 and 5 April 1975. Qualification was based on the amount of contributions paid, which are used to buy ‘units’. The value of a unit is £7.50 for men and women. [11] Graduated pension typically pays a small amount (£1 or so per week) to those entitled to it.
On 22 April 2009, the then Chancellor Alistair Darling announced in the 2009 Budget statement that starting in April 2010, those with annual incomes over £100,000 would see their Personal allowance reduced by £1 for every £2 earned over £100,000, until the Personal allowance was reduced to zero, which (in 2010–11) would occur at an income of £112,950.
Changes would take the full state pension to around £12,000 in 2025/26, after the £900 increase in 2023
The taxable amount is the amount due to be paid in the tax year under the terms of the contract: so the pensioner may have to pay income tax in a particular tax year even though he/she did not actually get the payment in that tax year.] [10] The 25% tax free lump sum for pensions can be spread across multiple years, so for example, each year 25 ...
Later in life, the accumulated fund can be accessed in the same way as other types of pension. [1] Employees can make contributions up to 100% of their salary, up to a maximum of £40,000 per year. People who are not earning can contribute up to £3,600 each year. Tax relief is given in the same way as other personal pension contributions. [2]
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