Question and Answers

Q. Am I eligible to make pension contributions?

A. Virtually any UK resident under the age of 75 will be eligible to make pension contributions and receive tax relief. If you do not have any earnings, you can still contribute up to £3,600 each year.

Q. How much can I contribute?

A. Since the Pension Simplification rules were introduced in April 2006, it has been possible to invest up to 100 per cent or your salary, subject to an annual limit for tax relief of £235,000 in 2008/09. In theory, you can do this every year, which means that you can catch up on pension payments you may not have made in the past.

Overall, the Government has also introduced a lifetime limit which is currently £1.65 million for tax privileged pensions.

Q. I am in my employer’s scheme; can I have a SIPP as well?

A. In the past, people in so-called ‘occupational schemes’ were only able to make additional voluntary contributions (AVCs) and the combined total contribution for an employee was 15 per cent of salary. Now, not only is it possible to contribute much more to a pension – up to 100 per cent of salary – but a person in an employer’s scheme may also take out a SIPP to enjoy all the advantages that this new style plan has to offer.