Deadline for a pension bonus

Hurry, hurry, hurry! If you have a personal pension you have only a month to cash in on a loophole in the law which may entitle you to a New Year present of several thousand pounds from the Government.

Money net

Hurry, hurry, hurry! If you have a personal pension you have only a month to cash in on a loophole in the law which may entitle you to a New Year present of several thousand pounds from the Government.

In theory, the parsimonious Gordon Brown could be giving up as much as £40bn, but the total is expected to come to nothing like as much.

From 31 January, the Chancellor is to stop people mopping up unused contributions to boost their pension pot. But until then, you can go back to the 1994-5 tax year to work out how much you fell short of the contributions you were entitled to make each year, and bundle them up into one big cheque to your pension provider, plus up to another 40 per cent from the Treasury.

But time is short, because to qualify for the handout by 31 January you must show your pension firm evidence of your earnings and pension contributions for the relevant years, obtain and complete Inland Revenue forms PP42, PP43 and, if you are a higher-rate taxpayer, form PP120, and return them with your cheque for the agreed amount.

But many people could be disappointed. Although there is bound to be a last-minute rush, do not bank on pension firms laying on extra staff to cope with the extra work. So get an accountant or independent financial adviser on the case. Quick.

One catch is that this concession overwhelmingly applies to the self-employed, whose earnings notoriously fluctuate from year to year. Whatever your unused capacity, you cannot pay in more than you earned in 2000-1, so if that was a poor year you are strapped.

The window is not open to members of occupational pension schemes, but they can, and should, take out a stakeholder pension for this year's tax relief.