Personal & Stakeholder Pensions

Personal pensions and Stakeholder pensions aim to build up a sum of money in a tax efficient way which can subsequently be used to provide an income or lump sum(s) during retirement.

Modern personal pensions are generally extremely flexible in that they will accept regular, monthly, annual or one-off contributions from individuals and from employers and the level of regular contributions can be changed at any time subject to the provider’s minimums.

Contributions will qualify for tax relief at the individual’s highest rate of income tax and are paid net of basic rate tax. The pension provider collects the basic tax relief from HMRC up to the maximum limits set by them. Any higher or additional rate relief entitlement can be reclaimed through the individual’s annual tax return.

The charges for Stakeholder plans are capped and cannot exceed 1.5% of the plan value each year for the first 10 years, and 1% thereafter. They are primarily designed for individuals who wish to save for retirement but who are not eligible to join an employer's pension scheme (such as the self-employed) or those who simply wish to top up their retirement savings. Stakeholder pension plans can also be started on behalf of children.

Growth in the value of the pension fund is free from capital gains tax and certain types of dividends paid to the plan are free from income tax. Under normal circumstances, no inheritance tax liability will arise from pension death benefits provided a named beneficiary exists at the date of death.