The personal pension scheme is sometimes known as a personal pension plan as well and is a UK individual investment vehicle of tax privilege. The primary purpose of a personal pension scheme is to build a capital sum of retirement benefits and along with which it also provides death benefits. Personal pension schemes first became available on 1 July 1988 by replacing retirement annuity plans.
Both the individual and their employers can contribute to this personal pension scheme, and its benefits can be taken at any time after the age of 55. You can also get it earlier if the rules allow or in case of a healthy illness.
Contributions Of Personal Pension Scheme
Contribution to a personal pension scheme can be made by either the individual or by their employer. An individual can put in an amount each year up to the lower of 100% of their earned income. They can even put in the prevailing annual allowance as well. An individual can also put a higher amount if they wanted to put it, but they won’t be allowed to claim tax relief on the surplus.
When we talk about employers contributing to the personal pension scheme, they can contribute an amount up to the annual allowance each year if they can demonstrate to the local inspector the taxes.
Tax Treatment Of Personal Pension Scheme
The personal contribution to the personal pension scheme the individual received basic rate tax relief at source claim by the provider. For example, if the basic rate taxpayer contributes a sum of £80 will be grossed up to £100. Higher rate taxpayers, on the other hand, claim additional relief through their tax returns. Only if they have one or by contacting HMRC, like if they claim £20 so they have effectively paid out only £60.
The employer’s contribution is paid gross and is an allowable expense against corporation tax or income. The personal pension scheme itself grows tax advantage which is not subject to UK capital gains tax.
Retirement Benefits From Personal Pension Scheme
There are many retirement benefits that the personal pension scheme gives, which you will get to know in brief in the documents themselves. But the best is that you can pass on the value of your pension fund to someone else in some form, along with this tax-free cash of up to 25% and a new option for post 75 years olds which is passing the benefits to the next generation.
A personal pension scheme is made especially for those who don’t have children or anyone else to support them closely. The personal pension scheme supports the individual through sickness and health. Even the newly launched schemes have a new clause that says that you can now even pass the benefits to someone else or on to the next generation.