Stakeholder pension holders need to plan

Individuals with substantial pension savings need to plan now in order to maximise the tax efficiency of their pension plans ahead of the introduction of the £1.5 million Lifetime Allowance (LTA) in 2006, according to Watson Wyatt.

"With A-day less than 18 months away, should individuals be making additional contributions prior to the new pension tax regime being introduced in April 2006?" asked Clive Newman, a senior consultant at Watson Wyatt.

"The answer will be entirely individual specific and will be driven by the value of an individual's existing stakeholder pension provision, the types of pension arrangement they have as well as their overall financial position and objectives.

"In some cases making additional contributions now could be the wrong move. But planning now - if not actually acting now - is essential to avoid creating a costly legacy."

According to Watson Wyatt, individuals will broadly fall into two categories: those with existing pension funding well below the £1.5 million LTA and those with existing pension funding just below or above the LTA.