In his 2018 Budget, the Chancellor chose to leave pension tax relief unchanged. Other than the raising of the Lifetime Allowance in line with the Consumer Prices Index to £1,055,000 for the 2019-20 tax year, the rules surrounding pensions remained the same.
Tax relief
Pensions offer generous tax breaks as an incentive to encourage us to save for our later years. If you contribute to a pension, or if your employer deducts your pension payments from your salary, you automatically get 20% tax relief as an additional deposit into your pension pot. If you are a higher-rate taxpayer, you can claim an extra 20%, while those paying additional rate tax can claim back an extra 25%. At age 55, you can generally take 25% of your savings as a tax free lump sum. There are a variety of ways of doing this, including taking the tax-free cash only, taking part of the tax-free cash, taking a lump sum including the tax-free element and taking the whole pension fund including the tax-free cash.
Ban on pensions cold-calling
The Chancellor announced that the long-awaited ban on pensions cold calling will at last be implemented; be alert, however, to an ongoing risk of illegal cold calls. Cold-calling is a common tactic used by scammers to try and access pension pots and has resulted in people losing substantial amounts to fraud.
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