Personal Pensions and Stakeholder Schemes

A personal pension plan is an investment policy designed to provide a lump sum and income in retirement. It is available to any United Kingdom resident under 75 years of age and can be purchased from insurance companies, high-street banks, investment organisations and some supermarkets and high-street shops. These are money purchase plans whereby contributions are paid into the plan, the money is invested and a fund built up. The amount of pension payable when the member retires depends on:

• the amount of money paid in;
• how well the investment funds perform; and
• the annuity rate at the date of retirement. The annuity rate is used to convert the fund into a pension.

You can take benefits from age 55. When you do retire, you can generally take up to 25% of the value of the fund as a tax-free lump sum. You must use the rest of the fund to:

• buy an annuity with an insurance company; or
• provide an income through income drawdown

Group personal pension (GPP) 

This is a form of personal pension that companies used as an alternative to an occupational scheme. It follows the same rules as an individual personal pension but normally benefits from an employer contribution and, sometimes, lower charges on the invested money.

Self-invested personal pension (SIPP)

This is a plan that has much wider investment options, including commercial property, directed by you, the policy holder. They are for people who want to be more active in the way their money is invested.

Auto-enrolment

The Government has introduced auto-enrolment, due to start in 2012, to encourage up to 8 million more people to pay into a pension plan.

Companies will need to provide a qualifying scheme or use the new National Pension Scheme (NEST). This new scheme will be a money purchase scheme with a low cap on charges.

For more information telephone 01225 785570 

or send us an email.

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