6 key points about pensions tax relief
By International Adviser, 2 Oct 18
How the UK Government is encouraging people to save for their retirement
No income tax or capital gains tax on pension funds
HM Revenue & Customs will not tax pension funds – there is no income or capital gains tax on the funds while held within the pension.
So, effectively the funds should grow at a faster rate as no tax is being paid (when compared to a taxed investment).
Tax will be paid if your pension savings exceed your total annual earnings, go above your annual allowance or are higher than the standard lifetime allowance, which is £1.03m (for 2018/2019 tax year).
Tax-free lump sum
For most personal pensions, you can normally start drawing benefits at the age of 55.
This might rise to 57 in 2028.
At this age you will have the option to draw the first 25% of the value of pension as a pension commencement lump sum which is currently tax free – so long as the full value of your pension funds are less than the lifetime allowance.
You may be able to take all the money in your pension tax-free if you’re expected to live less than a year, you’re under 75 and you don’t have more than the lifetime allowance in pension savings.
