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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.

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