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 77
when the rules change. Provision can be made for spouses and dependants both before and
after the member reaches 77. After the age of 77 it is also possible to leave the residual
pension fund to charity free of tax.