STAKEHOLDER SAVING
Pensions
Frequently asked questions
- What is a pension?
- Who are Stakeholder Saving pensions for?
- When can I retire and start drawing my pension?
- Can I draw money from my Stakeholder Saving pension before I reach retirement age?
- How much tax relief will I get on my Stakeholder Saving pension?
- Do I get tax relief if I don’t pay tax?
- What if my employer wants to boost my pension?
- Can I have a Stakeholder Saving pension as well as my occupational pension?
- Can I transfer an existing personal pension into a Stakeholder Saving pension?
- Can I stop paying into my existing personal pension and start up a Stakeholder Saving pension instead?
- How much should I pay into my pension?
- Where can I find out how my Stakeholder Saving pension is doing?
- Can I stop payments or reduce them if I have to?
- Can my Stakeholder Saving pension payments be deducted from my salary?
- When can I start a Stakeholder Saving pension?
- Can I lose the money that I pay into my Stakeholder Saving pension?
- What is an Employer Designated Stakeholder Savings pension scheme?
What is a pension?
Most people are familiar with the State Pension. However, there are also other types of pension available. Those that you take out yourself are called personal pensions and are long-term investments which begin to pay out when you reach retirement age. Many people retire when they reach State Pension Retirement age. This is currently 65 years of age for men and 60 years for women. However, there is an element of flexibility in when you can start to draw personal pensions. They differ from other investments because you receive tax relief on your payments into the scheme. Stakeholder Saving pensions are a type of personal pension.
The money in a personal pension fund can be put into a wide range of investments, provided the method has been approved by the Government. Then, when you draw funds from your pension, some is paid as a tax-free lump sum, and some as taxable income.
With Stakeholder Saving pensions, you can pay regular contributions, and you can also make lump-sum contributions whenever you like. You can vary the amounts you pay in by increasing/decreasing your contributions. You can even stop payments for a while without penalty, just like a flexible mortgage. If you contribute through the workplace you must agree the date of any changes with your employer.
Your employer can also make contributions.
The good news is you will benefit from tax relief on the contributions you make.
The Pension Service, part of the Department for Work and Pensions, can give you more information about your pension options ››
Who are Stakeholder Saving pensions for?
Stakeholder Saving pensions are designed to suit people who have no existing pension apart from the State Pension, the self-employed or anyone whose employer does not contribute to a workplace-based pension scheme. They are also an option for non-earners such as carers and students. In addition, if you don’t think your employer's own scheme will pay you enough, you can use a Stakeholder Saving pension as a top up.
When can I retire and start drawing my pension?
You don’t have to be retired to draw your Stakeholder Savings pension benefits but you can only draw it between certain ages. The minimum age is currently 50 but by April 2010 it will be increased to 55. The precise timing of this increase may vary between different Stakeholder Saving pension schemes. However, you must start to draw your benefits by age 75. Do bear this in mind when deciding on your retirement plans.
Can I take money out of my Stakeholder Saving pension before I draw my pension?
Sorry, but the answer’s no. When you draw your pension, you can choose to take up to 25% (a quarter) of your pension fund as a tax-free lump sum. And you can use the rest of your pension fund (or all of it, if you decide against a tax-free lump sum) to buy an "annuity". This annuity is a wage that will pay you a regular income during your retirement. That income will depend on the size of your pension fund and annuity rates at the time you take your pension.
How much tax relief will I get on my Stakeholder Saving pension?
Everyone gets a standard 22% tax relief, which means if you put in £78, your pension fund gets £100. Higher rated taxpayers (40%) can claim further tax relief.
Do I get tax relief if I don’t pay tax?
Yes. You’ll get standard basic rate tax relief, currently at 22%.
What if my employer wants to boost my pension?
Go for it! If your employer offers to contribute to your pension the extra money will help you build up a bigger pension fund. This will give you more money for your retirement.
For further advice speak to your Independent Financial Adviser, or find an approved IFA at www.ifap.org.uk ››
Can I have a Stakeholder Saving pension as well as my occupational pension?
Most people can top up their occupational pension by taking out a Stakeholder Savings pension as well but it’s best to talk to a pensions expert first. Occupational pensions can be advantageous because your employer may well bear a substantial part of the cost. A lot of occupational pensions also give you added benefits like life insurance and an ill health pension.
Can I transfer an existing personal pension into a Stakeholder Saving pension?
It’s possible but you really need to talk to a pensions expert, and do check first to see if your current pension provider will make a charge. You can also run two types of pension (your existing one and a Stakeholder) at the same time.
Can I stop paying into my existing personal pension and start up a Stakeholder Saving pension instead?
Yes, but do look before you take the leap. You’ll need quotes on how your current pension is performing, and you’ll want to find out if there are any exit charges. If it’s an occupational pension these usually offer other benefits so you should talk to a pensions expert first.
For more advice, speak to your insurance company, bank or building society. For further advice speak to your Independent Financial Adviser, or find an approved IFA at www.ifap.org.uk ››
How much should I pay into my pension?
The key here is balancing your current needs with how you want to live in the future.
Contributions to Stakeholder Saving pensions can be as low as £20 a month. Any payment made is best paid on a regular basis in order to get the most out of your pension — each week, each month or at less frequent intervals. It’s important to review your contributions regularly to make sure you are setting aside enough.
Everyone can pay £3,600 gross into a Stakeholder Saving pension per year, although you can pay more if you are an employee or self-employed, for instance.
For more advice, speak to your insurance company, bank or building society. For further advice speak to your Independent Financial Adviser, or find an approved IFA at www.ifap.org.uk ››
Where can I find out how my Stakeholder Saving pension is doing?
Your provider will send you a statement every year.
Can I stop payments or reduce them if I have to?
Yes you can. Stakeholder Saving pensions are meant to flexible, so if you need the money for something else, you can take a payment break.
Can my Stakeholder Saving pension payments be deducted from my salary?
Normally you have to pay via your bank by direct debit. Alternatively you can make one-off contributions by cheque. However, if you join an employer designated stakeholder pension scheme you can have your contributions deducted directly from your salary and paid to the pension provider.
When can I start a Stakeholder Saving pension?
There are no age restrictions. The sooner you start saving the better.
Can I lose the money that I pay into my Stakeholder Saving pension?
You should be aware that it is possible for the value of units to go down as well as up. However when investing over the long-term, equities are a good way of saving.
Over time, funds can be gradually transferred into less risky investments which reduces the risk of losing out.
Remember, Stakeholder Saving pensions must be run by trustees or by an authorised stakeholder manager, whose responsibility will be to make sure that the scheme meets the various legal requirements.
What is an Employer Designated Stakeholder Savings pension scheme?
Unless exempt, employers with 5 or more employees who do not have a good value pension scheme for all of their staff must offer them access to a Stakeholder Savings pension scheme.
Interested in Stakeholder Saving pensions?
