Tax Incentives for Saving

To encourage people to save for their retirement, the government offers many tax incentives for savers. Since the 6th April 2006, pension tax rules have even been simplified (see A-Day). If your pension scheme membership began prior to this date, the terms and conditions of your pension benefits may be different; for details see Pre A-Day Pensions. The main incentive for pension saving is tax relief. The government agrees to pay you twenty-two pounds for every seventy-eight pounds you save. For more information see article Tax Relief, and following articles. There are some limitations on saving however, such as the Annual Allowance and the Lifetime Allowance. When you come to retire, you will also be entitled to take a part of your pension fund as a tax-free lump sum, but the rest will usually be subject to income tax. For details of income tax see article on Tax on Pension Income.