Because pensions bring certain tax privileges, tax legislation has a strong bearing on shaping the benefits provided by schemes like the Telefónica UK Pension Plan. The tax savings under the Plan are:
- Your contributions are free of income tax, which saves you 20% on the cost of your pension if you are a basic-rate tax payer or more if you are a higher-rate tax payer
- Investment growth is partially free of tax
- Lump sum payments on death are usually free of inheritance tax
- On retirement, you can take up to a quarter of your entitlement as tax-free cash
- You may also save National Insurance on your contributions, see salary sacrifice
To benefit from these tax privileges the Plan has limits on benefits that can be paid. There are also limits on the amounts of savings you can make and still enjoy the tax privileges.
You need to understand these limits to ensure that your pension savings are tax-efficient. Explore the links to find out more.
Three tax-free allowances apply to benefits and contributions in all types of pension scheme.