Personal pensions have tax advantages to encourage individuals to save for their retirement:

When you contribute

Contributions you make to your pension are normally eligible for basic rate income tax relief. This means that for every £80 you contribute to your pension the government, through its HMRC department, will pay in an additional £20. Higher or additional rate taxpayers can claim back further income tax relief using a Self-Assessment tax return form. No tax relief is available on pension contributions paid by those at or over the age of 75.

While your pension is invested

The investments in your pension will grow free of income tax and can be sold without incurring capital gains tax (CGT).

When you retire

When you retire, you can generally take up to 25% of your pension value as a tax-free lump sum and use the rest to provide an income. The income paid from your pension is subject to income tax. The amount of tax you pay on your income during retirement will depend on the amount of your income together with your other taxable income. Neither Collegia Partners Limited nor Collegia Partners Trustees Limited provide tax advice. It is important to understand the tax implications of pensions and everyone’s circumstances are unique so if you are ever unsure, we strongly suggest you seek advice from an independent financial adviser.
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