Tax relief on contributions
Payments into a pension benefit from tax relief, so if you are a basic rate tax payer you obtain 20% and for a higher rate tax payer 40% tax relief. If it is a company contribution then it obtains corporation tax relief, currently 19%.
Tax free growth
Once contributions to your pension scheme are invested, they grow largely free of taxes.
The favourable tax treatment of pension funds means that they should grow faster than equivalent taxable investment funds.
Tax-free 25% lump sum from age 55
When you're eligible to start taking money out of your pension – currently from age 55 – up to 25% of its final value can be taken out as tax free lump sum.
Potentially no inheritance tax on death
In most cases your pension can be passed on to your beneficiaries without being included in your estate for inheritance tax purposes.
Withdrawing a beneficiary pension
If a person dies before their 75th birthday and leaves a pension for their beneficiaries, when those beneficiaries then withdraw from the pension it is tax free.
If the person dies aged 75 or over then the beneficiary can withdraw from the pension but it may be subject to income tax.
They don't have to wait until the normal age of 55 to access the pension either.