Pensions - the benefits

Pensions continue to be arguably the most effective form of savings plan available in Britain today. As with an ISA, the fund grows free of tax other than on dividend income but unlike an ISA, the investor also gets full income tax relief at their highest marginal rate for money invested.

• And now, since the ‘A Day’ changes of 2006, nearly everyone under the age of 75 can add to their savings
• Full income tax relief on savings – £6,000 can be turned into £10,000 (if you are a higher rate taxpayer)
• Flexible benefits at any time between age 50 and 75 (age 55 from 2010)
• 25 per cent tax free cash without having to take an income
• ‘Income drawdown’ – the alternative to annuity purchase
• Greatly increased contribution levels (up to £235,000 pa in 2008/09)
• Tax advantaged income and growth within the fund – dividend income is taxed
• The ability to pass the capital to your heirs – generally net of 35 per cent tax before age 75
• Freedom to transfer between pension providers and types