If you are of pensionable age, (presently 55 or 50 if you were born before 6 April 1960) here is some information you could find very interesting. The illustration below shows you for example that a higher rate tax payer can start to draw an income (pension) from a fund of £37,500 at a cost of just £17,500the balance of the funding comes from the Government. You can choose to take a drawdown rather than an annuity, and in this case the funds are invested – possibly in property or on the stock market. If that fund is invested well, it could show good growth in the future – and in five or ten years time, maybe right now might prove to be a good time to make such an investment!
Qualifying pension contributions continue to attract tax relief for individuals at their highest rate, potentially 40%. Tax Relief of 20% is usually deducted from the payment you make to the pension company – they reclaim this from the Treasury. Any higher rate relief needs to be claimed via your tax return.

If you are of pensionable age, presently 55 or 50 if you were born before 6 April 1960, you can accelerate the tax and cash benefits of single, lump sum contributions by opting for an immediately vested investment.

What you do is:

(This illustration assumes that all of the qualifying contribution can be relieved at the 40% income tax rate)

  • Make a payment to a pension provider of say £40,000
  • Pension provider recovers the 20% tax deemed to have been deducted of £10,000
  • You claim an additional 20% higher rate tax relief, £10,000
  • You immediately vest the fund created (£40,000 + £10,000) after taking 25% or £12,500 as a cash free lump sum


  • You have created a fund of £37,500 (£50,000 less lump sum £12.500). You could start to take an annuity or drawdown based on this fund. The amount of the drawdown or annuity will depend on current annuity rates.
  • You have invested net funds of just £17,500 to do this. (£40,000 less higher rate tax relief £10,000 and cash lump sum £12,500)