Personal and Stakeholder Pensions
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Personal and Stakeholder Pensions
Personal and Stakeholder Pensions
Personal and Stakeholder Pensions represent a popular and attractive way of saving for your retirement.
All monies invested into your fund grow free of capital gains tax, and the contributions you make are enhanced by income tax relief at source. For example if you invest £80, the government adds on tax relief (currently 20%) to enhance your contribution to £100! If you are a higher rate taxpayer you can claim additional tax relief up to earnings of £150,000 per annum .
A personal or stakeholder pension is an arrangement made in your name over which you have personal control.
You can alter your contributions, suspend them, or stop them completely.
You will be eligible to take 25% of your accumulated fund tax-free when you retire, from age 50 rising to age 55 by 2010. There are a range of options when you decide to take benefits whether before or after age 75.
Personal Pensions
Personal Pension Plans are money purchase arrangements. This means that a member contributes to the plan, the money is invested and a fund is built up. These Plans usually offer a range of investment mediums, such as providers own funds or access to external fund links therefore using the pension provider as a platform for your pensuion investment portfolio, to suit your attitude to investment risk. You can change your investment portfolio at any time.
Stakeholder Pensions
A Stakeholder Pension is a type of Personal Pension Plan (PPP). In other words, it is a money purchase arrangement designed to provide a lump sum and income in retirement. Like a PPP, it is available to any United Kingdom resident under the age of 75. As with a PPP, a major feature of this type of pension provision is that you do not have to be in employment to take one out and you can provide a Stakeholder Pension for your spouse/partner or your children. In respect of the latter, the policy reverts to the child/children at the age of 18.
A Stakeholder Pension has been designed to incorporate a set of minimum standards laid down by the Government. These include:
- A charging structure that is capped: a maximum of 1.5% a year for the first 10 years and 1% a year thereafter
- There can be no penalties on stopping contributions to an individual's fund or on transferring the benefits to another scheme
- The minimum contribution cannot be greater than £20 in any period whether regular or a one-off payment
Whilst Stakeholders are generally considered cheaper than Personal Pensions, investment choices may be restricted.