Saving for retirement
It is imperative that you start saving now and here at Capital Reward Plus Limited we offer you a stakeholder pension from one of the UK’s leading pension provider’s, Scottish Widows. Saving for retirement is something that most of us put off for as long as we can. But the reality is that the sooner you start paying into a pension the higher your income in retirement is likely to be. Whilst working you usually build up the right to a basic State Pension – and possibly an additional State pension – but these may not be enough to give you the standard of living you want.
A further incentive is the discounted annual management charge (AMC) of 1% that means more of your money continues to work harder towards your retirement.
More Information…
Why a stakeholder pension?
Why a stakeholder pension?
A Stakeholder Pension is the perfect way to get started offering lower costs than many traditional Personal Pensions as their charges are capped at 1.5% per annum for the first 10 years followed by 1% per annum thereafter. They also have the flexibility to stop, start or change your contributions at any time.
What is a stakeholder pension?
What is a stakeholder pension?
Stakeholder pensions were introduced by the Government in April 2001, designed to encourage more people to save for retirement.
The main benefits of a stakeholder pension is not only their low running costs but also the fact they have the flexibility to stop, start or change your contributions, transfer your fund to another provider or take retirement from age 55.
Stakeholder pensions have one type of charge, known as the annual management charge (AMC). This charge is currently capped at 1.5% for the first 10 years (1% thereafter), making them a cost effective way to save for your retirement.
The simplicity of a stakeholder also means the investment options are relatively restrictive however they certainly provide the ideal starting point for you pension contributions.
Who can contribute to a stakeholder pension?
Who can contribute to a stakeholder pension?
Everyone resident in the UK should be eligible to contribute to a stakeholder pension. The actual amount you will be able to contribute and receive tax relief on will vary according to your circumstances. After age 75, no tax relief is available on contributions though.
If you’re employed you can contribute up to the greater of £3,600 gross or 100% of your relevant UK earnings in a tax year (this will generally be your salary plus any taxable benefits less expenses) subject to a maximum annual allowance of £50000 2011/2012. From this amount you must deduct contributions you are paying to any other pension schemes in the same tax year.
If you’re self-employed you can contribute up to the greater of £3,600 gross or 100% of your Relevant UK Earnings in a tax year. This will normally be the profit you make (after any adjustments) for UK tax purposes. From this amount you must deduct contributions you are paying to any other pension schemes to which you contribute in the same tax year. See reference to overall annual allowance as above.
If you’re retired or a non-earner you can currently contribute up to £3,600 gross into personal pensions in a single tax year. If contributing on behalf of a child, any contribution counts against their limit and does not affect your own.
You may also be able to make use of up to 3 years of ‘carry forward’ based on an allowance of £50000 per year, subject to your salary and premium history.
Regardless of your employment status you should be aware of the lifetime allowance limits that apply to all individuals, £1.8 million (2011/2012) but falling to £1.5 million in 2012/2013.
If you are unsure about your eligibility for a stakeholder pension then please follow link below and complete the decision tree.
Annual allowance
Annual allowance
As well as your personal limit there is a further limit you need to be aware of – the annual allowance. If the total contributions to all your pensions exceed the annual allowance (£50,000 for 2011/12) a tailored tax charge clawing back reliefs over the allowance will be triggered.
If you are a member of a final salary pension scheme you should also include any benefits accrued under that scheme in your calculations. You should seek advice if you are uncertain of your status.
Lifetime allowance
Lifetime allowance
When contributing to a pension you should be aware of the lifetime allowance. The lifetime allowance is currently set at £1.8 million 2011/12, but reduces to £1.5 million in 2012/2013.
If your pension fund exceeds the lifetime allowance when you take retirement benefits you are likely to incur a tax charge on the excess. If you have a large pension fund and are unsure whether or not this will affect you please call 0800 138 2121 for more details.
Tax benefits of a pension
Tax benefits of a pension
How you can significantly boost your investment
Each time you contribute to your stakeholder pension the government will automatically add 20% (basic rate tax relief), significantly boosting the amount that gets invested.
Or for example if you wish to contribute £10,000 to your personal pension, the Government will pay £2,000 of this (20% of £10,000), meaning an investment of £10,000 costs you just £8,000.
Even non-taxpayers such as children or pensioners are entitled to the same rate of tax relief on contributions of up to £3,600 gross. If you’re working you can contribute up to 100% of your earnings for this tax year (effectively capped at £50,000) subject to potential ‘carry forward’.
Therefore if you have not made a pension contribution since 6th April, you should be able to make use of your full allowance now.
This tax relief is automatically added when you contribute to your pension (although there is normally a time delay of 6 to 11 weeks), meaning there’s no extra hassle for you or complicated forms to complete in order to receive the benefit.
Pension and tax rules are subject to change by the government. The tax reliefs referred to are those currently applying, and their value will depend on your individual circumstances.
As a higher rate tax payer you can also claim higher rate relief of up to 30%.
As well as the basic rate tax relief shown above, if you are a higher rate tax payer (and you have sufficient earnings in the higher rate tax bracket) you can claim up to a further 30% tax relief via your tax return.
Remember your pension allowance resets every 6th April so you can start making fresh contributions and reducing your tax liability for this tax year now.
Further tax benefits
Don’t forget that once invested in your pension the funds will grow free of UK capital gains tax and income tax (tax deducted from dividends cannot be reclaimed).
When you retire 25% of the value of the fund can normally be taken as a tax free lump sum, with the remainder then being used to provide you with an income (the income will be subject to tax).
No inheritance tax if you die before retiring
If you die before you begin taking the benefits from your pension the funds will normally be passed to your spouse or other elected beneficiary free of inheritance tax. Other tax charges may apply depending on the circumstances.
About Scottish Widows
About Scottish Widows
History
In March 1812, a number of eminent Scotsmen gathered in the well established Royal Exchange Coffee Rooms in Edinburgh, to consider setting up ‘a general fund for securing provisions to widows, sisters and other females’.
After many discussions, a first statement of principles enlarged the original remit, proposing ‘the formation of a General Society … the benefit of which may be extended to all parts of the United Kingdom’.
The Scottish Widows Fund Life Assurance Society – Scotland’s first mutual life office – opened for business in 1815.
In 1824 a policy of assurance was issued to the novelist Sir Walter Scott.
Over more than 190 years, from the Industrial Revolution – through two world wars and into the era of global mass communication – we have grown and developed our mission to help our customers plan their long-term financial futures.
Now, as part of the Lloyds Banking Group, we continue to dedicate our efforts towards providing outstanding service and value for money to all our customers.
Current Offering
The Scottish Widow is now part of the country’s popular culture, and Scottish Widows is one of the most recognised brands in the life, pensions and investments industry. (Source: IPSOS Brand & Advertising Tracking Study, February 2007).
We understand that preparing for the future is important, but that financial planning can be complicated and companies like us can be distant and remote. We are different because we understand.
We offer a range of products and services which can help our customers make the right decisions for their financial futures.
Scottish Widows currently employs around 4,000 people: in customer service; information technology; marketing and distribution; risk, legal and compliance; finance and support.
The Scottish Widows Investment Partnership is now one of Europe’s largest asset management companies, managing £92.5 billion of client funds (Source: SWIP – as at 31st March 2008).
Our headquarters are in Edinburgh along with our servicing centre.
