From 6 April 2006 (A Day) there is a single pensions regime, under which contributions are tax deductible and employers contributions are exempt from national insurance. Individuals may draw benefits at 50 (55 from 2010). The fund value is capped (the lifetime allowance) at £1,650,000 (£1,600,000) (defined benefits are valued using a multiple of 20, so maximum pension equivalent to £82,500 pa (£80,000pa) Individuals exceeding the cap before A-Day could register a personal higher allowance and special rules apply. If the lifetime allowance is exceeded at retirement, the excess will be subject to a 25% lifetime allowance charge plus income tax on the balance drawn. The contribution annual allowance is £235,000 (£225,000) (defined benefits are valued using a multiple of 10) and if individual and company contributions exceed this the individual is liable to 40% tax on the excess. The allowances will increase in pre-announced stages until 2010 (approx 5% p.a.) and will be reviewed thereafter.
Basic State Pension (Per Week)
| £ | |
| Single Person | 90.70 |
| Married Couple | 145.05 |
Pension Credit (guaranteed element) per week
| £ | |
| Single Person | 124.05 |
| Married Couple | 189.35 |
Most individuals under the age of 75 will be able to contribute up to £3,600 (after basic rate tax relief) to a stakeholder or personal pension scheme, without reference to the level of annual earnings. Children and spouses with no earnings will be able to contribute to these schemes, or have contributions paid for them.