Pension contributions (Table B)

The 'earnings cap' for personal pension contributions and occupational scheme benefits is set at £105,600 for 2005/06 (2004/05: £102,000). The maximum contributions for different ages are set out in the table.

The rules for tax-approved pension schemes will change radically from 6 April 2006. The new limit will be based on the funds available to buy benefits at the date of retirement, rather than on contributions or on the benefits themselves. This significant change is something which all pension investors need to be informed about over the coming year.

Some of the most significant aspects of the new rules, such as what a pension fund will be allowed to invest in, have not yet been confirmed in detail. It is likely that residential property will be permitted, but until the detailed rules are published, it is hard to predict what the restrictions and conditions will be.

Individual Savings Accounts (ISAs)

The maximum amount which can be contributed to a tax-free ISA will remain £7,000 until 2009/10, with no more than £3,000 invested in a cash fund. The limit was due to fall to £5,000 (with £1,000 in cash) from 6 April 2006.

Child Trust Fund

Child Trust Fund accounts are available for the first time this year. The Government will pay a voucher for £250 into these accounts for each child born from 1 September 2002 onwards. Parents and others will be able to add up to £1,200 a year in total into these accounts, which will be able to grow tax-free like an ISA. The child will only be able to touch the money at age 18.

The Chancellor has announced that the Government is considering making further payments into CTF accounts when the child is 7 and again when the child is at secondary school, and these payments might be £250 for all children and twice that for poorer families. However, this is currently only a proposal for consultation.

Other investment measures

Rules will be introduced to make the tax treatment of arrangements which do not pay or charge interest, but are supposed to replicate the effect of interest - for example, to comply with Shari'a law - the same as the arrangements they replicate. This change will apply from 6 April 2005.

There are a number of technical changes to the treatment of collective investment schemes such as unit trusts and open-ended investment companies. There will be a consultation about the possible introduction of a new type of collective investment product for real property (a REIT or Real Estate Investment Trust).