Personal pensions, introduced on 1 July 1988, originally aimed to give people who were not part of a company pension scheme their own portable pension, designed on a money purchase basis although since April 2001 certain individuals who are members of company pension schemes can also take out personal pensions.
Legislation for personal pensions and stakeholder pensions are identical (only the charges and product terms are set for stakeholder).
Annual pension allowance
There’s a limit to the amount you can invest in pension plans every year before you are taxed on your contributions. It’s set by the Government and it’s called the annual allowance. The annual allowance for 2012/2013 is £50,000.
As well as an annual allowance charge, there’s a limit to the amount you can have built up in any pension plan when you start taking your retirement benefits. It’s set by the Government and it’s called the lifetime allowance. The lifetime allowance for 2012/2013 is £1.5 Million.
You can take pension benefits between ages 50 and 75. Normally these will be in the form of 25% of the fund as tax free cash, and the rest applied to produce an annual pension, although other alternatives are now available.
Level and bases of, and reliefs from taxation are subject to change.