Pensions fundamentally changed on 6th April 2006 and for many individuals who had previously not made any pension provision this is good news.

There are no restrictions on what contributions you can make to a SIPP nor are there any restrictions on the amount of benefits that you can take out. There are, however tax charges if you pay too much in as contributions in any given tax year and tax charges if you take too much out when you come to retire.

Each individual has an annual allowance of up to £225,000 in the tax year ending 5th April 2008. If your contribution goes above the annual allowance you will pay an annual allowance tax charge on the excess of 40%. If your earnings are below £225,000 you will only obtain tax relief up to 100% of those earnings but any contribution over 100% of your earnings will not receive tax relief.

Basic rate tax relief is obtained at source, which means you pay the net amount to Montpelier and we obtain tax relief from HMRC.

For example, if your annual earnings are £100,000 and you wanted to pay a contribution of £100,000 to your Montpelier SIPP, you would simply send a cheque with your application for £78,000. Montpelier would apply for 22% tax relief to go in to your SIPP on or about the fourth of the month after the contribution is received and around six weeks, later the extra £22,000 tax relief would be credited by HMRC to your SIPP account for you to invest.

As the above client is a higher rate taxpayer, they are entitled to a further 18% tax relief through their annual self-assessment return.

There are some interesting tax planning opportunities regarding contributions in areas such as bonus sacrifice, pension input periods and in specie contributions.

The annual allowance does not apply in the actual tax year that retirement benefits are taken and this offers some scope for the wealthy to obtain maximum tax relief.

If you would like to know how these tax-planning opportunities might benefit you please contact your independent financial adviser or accountant

The Montpelier SIPP is not just about putting contributions or transfers in, there will come a time between the ages of 50 and 75 (55 from 2010) when you want to take your retirement benefits from the scheme. The good news nowadays is that you do not need to finish work to take these benefits.

Tax efficiency is not restricted to tax relief on your contributions there is also the opportunity to take up to 25% of your fund as a tax-free lump sum. In the current tax year, 2007 - 2008 this figure is a maximum of £400,000 based on a lifetime allowance figure of £1,600,000. Of course, if your fund is less than £1,600,000 the maximum is 25% of your fund.

The lifetime allowance increases every year until 2010 and is the most any individual can build up in a pension fund without an excess tax charge. If you exceed the lifetime allowance, you will have to pay tax charges unless your fund was protected following the pension changes in 2006.

You have the choice of how to take your benefits you can of course take the whole, or part, of your fund and purchase an annuity from the provider of your choice. This could secure your pension for life.

You could take pension drawdown where your annual income is calculated by means of the Government Actuaries Department (GAD) rates at the time of your retirement. Your pension using this route would be unsecured and could reduce in coming years.

There is an option to gradually phasing in your benefits so that you can take advantage of tax planning suggestions from your independent financial adviser to potentially reduce your income tax.

There is no right or wrong way to take benefits and although the choices seem simple, when taken together with your other circumstances, the decision might actually be more complex. For this reason, Montpelier suggests you do not commence taking benefits without taking advice from your independent financial adviser.

If you die before age 75 without taking any benefits the whole of your fund can pass tax-free outside of your estate to your nominated beneficiaries.

If you have taken income drawdown then your remaining fund will pass on to your nominated beneficiaries with a 35% tax charge.

There are special rules for retirement and death benefits for clients age over 75.

If your pension fund is in alternatively secured pension, it is not possible under current legislation to leave a lump sum to any beneficiaries on your death after 75 without punitive tax charges applying.

Your dependents also have the choice as to continue taking an income instead of by means of annuity purchase or income drawdown from the fund at any stage upon your death at any age.