Personal and Stakeholder Pensions and SIPPs
Personal Pensions
These
are tax-efficient schemes available to everybody; the self-employed, employees who
have no company pension scheme (or wish to make extra contributions to a plan
outside of their employer's), housewives and others without earnings including
children.
Self-employed
You will be
responsible for your own retirement planning. Flexibility in a pension plan may
be important to you, with contribution holidays and lump sum payments.
Employed
Your employer may offer a group personal pension
and administer the scheme. If you do not have access to a company pension
scheme, you will be responsible for your own retirement planning through a
personal pension, which your employer may make contributions to.
Bates can advise you on the best
personal pension available to suit your current lifestyle, retirement planning
requirements and how to protect your pension contributions. There is a great
choice within personal pension contracts and many offer a wide range of
investment funds, both their own in-house funds and those of famous investment
houses.
Stakeholder Pensions
A tax-efficient scheme introduced
by the Government on 6th April 2001, Stakeholder Pensions are nevertheless
a type of Personal Pension and are subject to the same rules.
Every UK employer with five or more employees, who does not offer an Approved
Occupational Pension or certain Group Personal Pensions, had to offer access to
a Stakeholder Pension scheme by 8th October 2001.
It is designed to encourage the
following individuals to make provision for their retirement:
Many other people may access personal and stakeholder pensions, including minor children,
persons in occupational schemes (since 6/4/2006 all occupational scheme members
may have personal pensions as well regardless of earnings), and unemployed
people below
the age of 75.
All of the above will receive basic rate tax relief
(regardless of their actual tax position or earnings) on their contributions to
a minimum of £2,880 per annum net (grossed up to £3,600
p.a.) and a maximum of earned income in that year, or £235,000
(tax year 2008/9) (see
A-Day Actions).
Stakeholder schemes are designed to be straightforward,
low cost, flexible and have clear charges.
Self -Invested Personal Pensions ("SIPPs")
A specialist type of personal pension, a SIPP gives its owner freedom
to invest in a wider choice of investments. That choice includes direct
investment in quoted stocks and shares, unit trusts, bonds, and includes
commercial property. The administration and investment costs of a larger
SIPP fund (e.g. over £100,000) may be less than within a standard managed
pension product, although they are not very cost-effective for smaller
funds.
A recent innovation is the deferred SIPP
contract, being a personal pension that may "switch on" SIPP options at any time
in the future, but until that date it enjoys the simpler charges of a personal
pension investing in typical pension funds.
How much will I get from any of these
personal plans?
Since all such schemes are based upon contributions and
investment performance, it is impossible to accurately state the future
pension fund value nor the annual income from the future annuity. However,
projections (which are estimates only) can be obtained from your
pension provider or financial adviser.
Pension transfer?
Strangely enough, many who consider themselves financially astute, and
think nothing of switching their mortgage provider every few years,
never seem to consider changing their pension provider(s), regardless of
fund performance or comparative charges!
If you have one or more personal pensions from over the
years, chances are the older ones will have higher charges, less investment fund
choice or restrictions on their flexibility.
You can:
-
Leave it where it is without further contribution
("paid-up")
-
Continue to pay into it at the same rate
-
Transfer the fund value to a a better, up-to-date pension scheme.
Bates pension specialists have helped many people in your
position and in most cases were able to improve the benefits, sometimes
substantially.
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