Personal Pension Arrangements
Including Stakeholder Pensions
Personal pensions (including
Stakeholder pensions) may be suitable if you are:
- employed (whether you are
in a company pension scheme or not)
- self-employed
- Looking to commence a
pension for a minor (e.g., grandchild), or
- if you're not working but
can afford to put aside money for retirement.
- employees on a moderate
income who wish to top up the money they would
get from a company pension
How personal pensions / stakeholder pensions
work?
With a
personal pension arrangement, the individual pays
either a regular amount, usually every month, or a
lump sum to the pension provider who will invest it
on their behalf into a fund (or series of funds)
held within the pension plan. The fund(s) is usually
run by financial organisations such as insurance
companies, banks, building societies, and unit
trusts.
The pension
fund value as at an investor's chosen retirement
age will depend on the level of contributions and
how well the fund(s) have performed over the plan's
lifetime. The companies that run personal pensions
apply charges for starting up and running your
pension plan. Charges are normally deducted from
your fund as an annual percentage known as an annual
management charge. Typically this charge is between
1% - 1.5%.
Contribution levels and tax
relief
As from 6 April 2009 it is possible for an investor to save as much as they
like into any number and any type of pension
arrangements. However, an investor only gets tax
relief on contributions of up to 100 per cent of
earnings each year, subject to an upper 'annual
allowance' (£255,000 for the 2010/2011 tax year)
Savings above
the annual allowance will be subject to a tax
charge. More details can be provided on
contributions above the annual allowance if
required.
Taking pension benefits (crystallisation
events)
As from
6 April 2006 an investor can take up to 25 per cent
of the value of their total pension savings from all
sources as a tax-free lump sum providing they have
attained age 50 (55 from 6 April 2010), up to a
maximum of 25 per cent of the lifetime allowance.
There is no requirement to
stop employment when commencing taking benefits.
The lifetime allowance for the
tax year 2010 / 2011 is £1.8
million.
Do you need a personal
pension?
The decision as to whether you
need a pension will depend on:
- affordability - do you currently have the
means to commence saving for retirement?
- other pension arrangements - what value have
you accrued to date, and will it be enough at
your chosen retirement age?
Calculating the value of other
pension arrangements
If an
individual has one of the following:
- A Personal Pension Plan / Self Invested
Pension Plan (SIPP)
- A Stakeholder Pension (SHP)
- A Section 32 Buy-out plan (S32)
- A Retirement Annuity Contract (RAC/RAP)
- An Executive Pension Plan (EPP)
- or is/was a member of a Small Self
Administered Scheme (SSAS)
Then Ashton Hoyle can provide a true value and a
projection of benefits at the age you have chosen to
retire. This is a valuable benefit which can show
you if you are on target or need to contribute
further for your retirement. Either way you will
have 'peace of mind'. All other existing policies,
including the Basic State Pension, can be included
to provide a complete personal solution for your
selected retirement age.
What to do next
If you do not currently have a
pension arrangement, and are looking for advice as
to which one is right for you, or you have an
arrangement that you have not reviewed recently and
would like an impartial assessment, then please
contact us for a free initial
consultation.
At Ashton Hoyle, we pride
ourselves on our ability to collate and translate
the complex details often associated with pension
arrangements, making your retirement needs that much
easier to plan for. Whatever your financial advice requirements are,
you can be assured that Ashton Hoyle are well
positioned to provide an innovative answer and we
look forward to speaking to you on any financial
matter. Contact us now
to see how we can help. |
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