Stakeholder Pensions Product Information
Stakeholder Pensions are savings schemes designed for
providing for retirement, they are low charge personal
pensions
launched in April 2001.
They are ideal for people in the UK who want to save for retirement,
safe in the knowledge that they will not be charged excessively
by an insurance company.
Your
stakeholder pension scheme will invest your contributions
into a retirement fund. When you retire,
up to 25% of the pension fund value can be taken as tax-free
cash and the balance used to provide an income, known as
an annuity from
an insurance company.
Whats Special About Pensions?
They're a way of saving towards retirement where
the
taxman will add money for you as well as allowing tax efficient
growth.
Unlike ISAs every £100 you pay the taxman adds £28.21
immediately, higher rate taxpayers can claim another £23.08
when completing their tax return at the end of the year.
That's more than 28% increase and almost 67% increase
for high rate taxpayers on the net cost* (what its cost
you from your pocket), making this one of the most tax-efficient
ways of saving.
You pay contributions less an amount equal to basic
rate tax relief, the insurance company will claim this
back for you from the Inland Revenue and add it to your
plan, together with any amount you have paid. This is
referred to as making contributions net of basic rate
tax.
* net cost for a higher rate taxpayer is £76.92,
therefore total tax relief is 67% of the net cost to
you. This is based on our understanding of current law
and tax practice.
How do Stakeholder Pensions Differ from other
Pensions?
By law, stakeholder pensions must meet a number of minimum
standards to make sure they offer value for money, flexibility
and security.
Stakeholder pension providers can only charge you a
maximum of one per cent of the value of your pension
fund each year to manage your fund. The charges are taken
from your fund.
They have no initial charge!
Flexibility to stop and start payments as you choose
without penalty!
It is usually best if you adopt
a regular pattern but if you need to stop for a while you
can do so, without penalty.
How Much Can you pay into a Stakeholder Pension?
You can invest into a stakeholder pension plan at any
level up to the Inland Revenue permitted maximum of percentage
of earnings or £3,600 gross per annum, whichever
the greater, using your best year's
earnings from the last five tax years where you were not a member of a
company pension scheme.
| Age
at 6th April |
%
Net Relevant Earnings |
| 35
or less |
17.5 |
| 36-45 |
20 |
| 46-50 |
25 |
| 51-55 |
30 |
| 56-60 |
35 |
| 61-75 |
40 |
Who Can Apply for a Stakeholder Pension?
Practically Anyone!
You cannot pay into a Stakeholder Pension if you fall
into one of the following categories:
Not "resident and ordinarily resident" in
the UK, unless in receipt of "net relevant earnings" which
are chargeable to UK income tax, or either a "Crown
servant" or the spouse of a "Crown servant" working
overseas.
A member of an occupational pension scheme,
earning over £30,000
or have been a controlling director at any time
since 6 April 2000.
People age 75 or over.
Children under the age of 16 cannot pay into a pension
themselves. However, you can pay into a pension on
behalf of a child under 16.
If you do fall into the above categories, there
may still be occassions where you can pay into a stakeholder
pension.
For further information visit
Pensions
Network.com
or click
here to view the FSA's Stakeholder
Decision trees
