Will I get tax relief on my contributions?

You will usually get tax relief on your contributions to a stakeholder pension or personal pension. With a basic rate of income tax of 22%, every £100 that goes into your pension costs you £78 (based on the tax year 2004/05). If you pay income tax at the higher rate of 40%, you can claim back the tax difference (compared with the basic rate of income tax)from the Inland Revenue. So, with the higher rate of income tax at 40%, every £100 that goes into your pension fund costs you £60 (based on the tax year 2004/05).

If you want to know more about stakeholder or personal pensions and tax, see the Inland Revenue leaflet Personal Pension Schemes (including Stakeholder Pension Schemes) – A guide for members of tax-approved schemes (IR3). See the directory for details about how you can get a copy of this leaflet.

Make sure you understand what different pension schemes offer, and what they would cost you. A second pension is one of the biggest investments of your life, so shop around to get details of a range of different types of pensions that are available.