What can and can't be done in a pension

The following provides a brief overview of some of the parameters applying to pension arrangements:

Contributions

An annual limit applies to contributions - this generally is limited to earnings subject to an overall annual allowance. Contributions can be made by individuals and/or employers where applicable. Individual contributions are made net of basic rate tax which is then claimed on behalf of the scheme member by the scheme administrator, City Pensions Limited. As described previously, contributions can be invested in a wide range of investments. In addition to the annual allowance, there is an overall limit as to what the pension fund can grow to.

Taking your Benefits

There is a great deal of flexibility on how benefits can be taken at retirement. Options include:

• Taking a lump sum (subject to limits) from the pension fund

• Using the pension fund to purchase an annuity to provide guaranteed income

• Take a variable income (subject to limits) directly from the pension fund

• Take no income at all and simply leave the fund invested

Generally speaking the above options need to be exercised prior to reaching the age of 75 when the rules change. Provision can be made for spouses and dependants both before and after the member reaches 75. After the age of 75 it is also possible to leave the residual pension fund to charity free of tax.