Pensions and lifetime planning—Part 1
Produced in partnership with John Hayward, Pensions Author, and Wyn Derbyshire of Gunnercooke LLP
Pensions and lifetime planning—Part 1

The following Private Client guidance note Produced in partnership with John Hayward, Pensions Author, and Wyn Derbyshire of Gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Pensions and lifetime planning—Part 1
  • Pensionable earnings
  • Personal contributions—the annual allowance
  • The lifetime allowance
  • Restrictions on tax relief—introduction

Membership of an occupational or personal pension scheme affords the opportunity to utilise the tax reliefs available during working life to save for a pension on retirement. This Practice Note looks at the main features where opportunities exist for pension scheme members to maximize the tax reliefs available to enhance their retirement benefits. These features include pensionable earnings, personal contributions and their impact on the annual and lifetime allowances. The Practice Note also mentions where appropriate the traps to avoid.

Pensionable earnings

For both employers and individuals to obtain tax relief on their contributions to registered pension schemes their contributions must be based on the relevant UK earnings of the members concerned. Relevant UK earnings are defined as:

  1. employment income as defined under section 7(2) of the Income Tax (Earnings and Pensions) Act 2003

  2. income chargeable under Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) derived from the carrying on or exercise of a trade, profession or vocation

  3. patent income as defined under section 189(7) of the Finance Act 2004, and

  4. income which is chargeable under ITTOIA 2005, Pt 3 and is immediately derived from the carrying on of a UK furnished holiday lettings business

Personal contributions—the annual allowance

The annual allowance sets the tax-free level of an individual’s annual pension input amount that