Pensions Simplification

Allowances limit the amount of tax-privileged pension saving. Carry back and carry forward in relation to personal pensions and retirement annuities no longer feature.

The tax-privileged maximum annual contribution and Defined Benefit (DB) scheme increase allowance is £215,000 for 2006/7, rising to £255,000 by 2010/11, then to be reviewed.

Contributions and defined benefit based pension accumulation within a registered pension scheme may be ignored for the purposes of the annual allowance in the year that the member takes all their benefits from the scheme.

Income tax relief is available on member contributions of up to 100% of earnings. But for those earning under £3,600, tax relieved contributions of up to £3,600 a year may be made irrespective of earnings.

The measure of the annual increase in capital value of pension savings in defined benefit schemes will be based on the deemed capital value of the increase in the member's pension entitlement from one scheme year to the next. A factor of 10:1 is used to value such increases. This is set against the members annual allowance.

The concept of scheme approval has been replaced by "scheme registration". The provisions described here relate to registered schemes - non registered schemes are what we used to refer to as FURBs and UURBs.