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Registered pensions

  2015/16 2014/15
Lifetime allowance (LA) £1.25m £1.25m
Annual allowance (AA) 40,000 40,000
Money purchase Annual allowance (MPAA) 10,000 N/A


  1. Contributions to registered pensions are paid net of basic rate tax. The policyholder pays 80% and HMRC pay 20%.
  2. Tax relief at the taxpayer's highest income tax rate given on pension contributions up to 100% of earnings, capped by annual allowance. Relief is given by expanding the basic rate band by the grossed-up amount of the contributions paid in the year.
  3. Those with little or no UK relevant earnings can make pensions contributions up to £3,600 gross (£2,800 net) per year.
  4. AA can be expanded by unused allowance brought forward from the previous three tax years.
  5. Annual allowance charge levied at individual's marginal rate for contributions exceeding annual allowance.
  6. Employers can contribute to the employee's pension fund up to the AA per year, less any contributions made by the individual. Employer will enjoy tax relief on those contributions under the normal rules for business expenses.
  7. While the money is held within the pension fund, it is exempt from taxes on income and gains, so it grows faster than investments held directly by an individual.
  8. Investors in personal and other defined contribution pension schemes can access all of their pension savings once they reach age 55.
  9. When the investor takes benefits from the pension scheme, under flexiaccess drawdown up to 25% of the accumulated fund can be drawn as a tax-free lump sum. The balance is taxed at the investor's marginal rate of tax that applies in the year those benefits are drawn.
  10. LA is measured as the capital value of the pension benefits at time pension benefits are first taken.
  11. Lifetime allowance charge is 55% if funds exceeding the LA are taken as lump sum, or at 25% if the benefits are taken as income.
  12. MPAA applies where taxpayer has started to take taxable income from a defined contribution scheme

State pension

Maximum amount per week 2015/16 2014/15
Single person £115.95 £113.10
Married couple 185.45 180.90
Addition at age 80 0.25 0.25


  1. An individual is eligible to draw the state retirement pension when he or she reaches state pension age (SPA). This currently varies for men and women, but for younger people the SPA is gradually increasing to 68.
  2. An individual who qualifies for the state pension may choose to defer claiming the pension. If the person defers for a period of 12 months or more, that person may opt to receive either the pension foregone as a lump sum or a higher pension.
  3. The state pension is taxable, as is any lump sum received if the state pension is deferred.
  4. Individuals who reach SPA on or after 6 April 2016 will receive a flat rate state pension. This will replace pension credit, the main state pension and second state pension.