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The Procedure of Pension Taxation and How It Is Beneficial

Pension taxation is one of the most debated topics in the world today. A big percentage of the world’s population is old and relies solely on the pension that they receive from their employers. But just like any other earning that is taxable, the pension the individual receives after retirement is also taxable. However almost all the governments in the world have provided various schemes as well as provisions to help increase the savings of the pensioners in their old age. For instance in UK there is pension regime that came into being on 6 April 2006. The major reason behind creating the regime was to have a single set of regulations that would cover all the pension provisions. Barring a few exceptions almost all of the set agendas have been achieved with this regime.

Although there are no limits on the pension contributions that can be done for any individual yet the tax reliefs as well as the tax penalties create limits within the pension regime.

A few examples of these are:

  1. The tax relief is offered for the member contributions that could range from the marginal rate to 100% of the earnings within a tax year.
  2. There is no limit on the contributions from the employer with a rider that it can be shown that it was solely meant for the business purpose. The corporation tax relief would be given to them in the year of the payment.
  3. The contribution of upto 3,600 pounds can be made for any of the individual that is below the age of 75. The basic rate income tax relief would be provided to them.
  4. Another major point is that there is no comparison between the contributions as well as the annual allowance in the tax year of retirement.
There are many other similar pension taxation benefits that are given to the retired people. Many countries have different pension taxation plans as well as procedures that they have put in place to provide maximum tax relief to the retired people.