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
• Personal contributions are made net of basic rate income tax but if you are a higher rate taxpayer then you can obtain higher relief 
• Flexible benefits at any time between age 55 and 75
• 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 £255,000 pa in 2010/11)
• 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