Compact Services

Registered pensions

	2017/18	2016/17
Lifetime allowance (LA)	£1m	£1m
Annual allowance (AA) max	40,000	40,000
Annual allowance - min	10,000	10,000
Money purchase annual allowance (MPAA)	4,000	10,000

Notes

1. Contributions to registered pensions are paid net of basic rate tax. The policyholder pays 80% and HMRC pay 20%.
2. Tax relief at the taxpayer's marginal income tax rate is given on pension contributions up to 100% of earnings, capped by the AA. Relief is given by increasing the basic rate band and higher rate threshold by the grossed-up amount of the contributions paid in the year.
3. Those with little or no UK relevant earnings can make pensions contributions up to £3,600 gross (£2,800 net) per year.
4. AA can be increased by unused allowance brought forward from the previous three tax years.
5. AA is usually tapered down by £1 for every £2 of adjusted income over £150,000, to a minimum of £10,000.
6. Annual allowance charge is levied at the individual's marginal rate for contributions exceeding the annual allowance.
7. Employers can contribute to the employee's pension fund up to the AA per year, less any contributions made by the individual. Employer will enjoy tax relief on those contributions under the normal rules for business expenses.
8. Investors in personal and other defined contribution pension schemes can access all of their pension savings once they reach age 55.
9. When the investor takes benefits from such pension schemes, under flexiaccess drawdown, up to 25% of the accumulated fund can be drawn as a tax-free lump sum. The balance is taxed at the investor's marginal rate of tax that applies in the year those benefits are drawn.
10. LA is measured as the capital value of the pension benefits at time pension benefits are first taken.
11. LA charge is 55% if funds exceeding the LA are taken as a lump sum, or 25% if the benefits are taken as income.
12. MPAA replaces AA where taxpayer has started to take taxable income from a defined contribution scheme. There is no carry forward of unused MPAA.

State pension

Maximum amount per week	2017/18	2016/17
Old state pension - Single person	£122.30	£119.30
Old state pension - Married couple	195.60	190.80
New state pension	159.55	155.65

Notes

1. An individual is eligible to draw the state retirement pension when he or she reaches state pension age (SPA). This currently varies for men and women, but for younger people the SPA is gradually increasing to 68.
2. An individual who qualifies for the state pension may choose to defer claiming the pension. If the person defers for a period of 12 months or more, that person may opt to receive either the pension foregone as a lump sum or a higher pension.
3. The state pension is taxable, as is any lump sum received if the state pension is deferred.
4. Individuals who reach SPA on or after 6 April 2016 receive a flat rate state pension, which replaced the old state pension, the second state pension and pension credit.