Lifetime Allowance

The Lifetime Allowance is the total amount of pension saving that you may make under the tax privileged treatment that pensions enjoy.

For Section 1 members, the total value of your Retirement Account at retirement will be measured against the Lifetime Allowance. The Lifetime Allowance will start at £1.5 million in 2006 and increase each year until 2010, when the Government will review it.

Tax Year	Lifetime Allowance
2006/7	£1.5m
2007/8	£1.6m
2008/9	£1.65m
2009/10	£1.75m
2010/11	£1.8m

Exceeding the Lifetime Allowance

Under the O2 Pension Plan you will not be prevented from exceeding the Lifetime Allowance, however you may wish to consider carefully whether you wish to make savings that do not enjoy the same tax priviledged status as those savings within the Lifetime Allowance. When your fund is used to generate pension benefits it will be subject to tax. Those benefits deriving from a fund in excess of the Lifetime Allowance are taxed at a higher rate than those below it; the table below illustrates.

	Tax Free Cash	Pension
Fund below the Lifetime Allowance	May take 25% of fund as tax free cash (see Cash allowance)	Pension taxed as income your marginal rate of income tax of (either basic rate of 22% or higher rate of 40%)
Fund above the Lifetime Allowance	No tax free cash allowed	Pension taxed as above plus an additional 25%. May take as cash with total tax of 55%.

Those members of the Plan who exceeded the Lifetime Allowance purely through their membership of the O2 Pension Plan on the 6 April 2006 have been written to individually.

If you have benefits that are close to or exceed the Lifetime Allowance you should consider taking financial advice to ensure that you are saving in the most efficient way for you. Help on finding a financial adviser can be found at Financial Advice