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Pension deadline looms

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23/01/2008

People who don’t top up their pension before 5 April 2007 will lose the chance to make a contribution for this tax year, stockbrokerage Charles Stanley has warned.

According to the firm, there is no longer an opportunity to carry an entitlement from one year to the next, meaning the message from the Government is: “use it or lose it.”

A Self Invested Personal Pension (SIPP) is similar to a normal personal pension plan in that they both come under the same basic rules regarding contributions, tax relief and eligibility. The main difference tends to be in terms of the underlying investments.

With a personal pension, the plan holder usually pays money to an insurance company for investment in an insurance policy, whereas a SIPP allows you greater freedom to invest in a range of asset classes, and the plan to holds these investments directly. You can control the investment strategy or you can appoint a fund manager or stockbroker to manage the investments.

However, for those SIPP-holders that base their contributions for this tax year on estimated earnings, Charles Stanley has also highlighted that, if earnings turn out to be lower than expected, the excess contributions may remain within the pension funds. Any reclaimed tax must be repaid to HM Revenue and Customs (HMRC). However, you can often remove the excess from the SIPP on repayment of the reclaimed tax to HMRC if you wish.

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