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Personal & Stakeholder Pensions

The following PENSION information is simply a brief introduction to pensions and therefore it is advisable to arrange tos talk over either your existing pension.

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The following PENSION information is simply a brief introduction to pensions and therefore it is advisable to arrange to talk over either your existing pension provisions or discuss any plans you may have regarding your future pension needs and requirements and obtain pension advice from a qualified pension advisor. UK pension advice and UK pensions are generally provided by qualified Independent Financial Advisers who can provide a pension advisory service.

Personal pension plans (PPPs) and stakeholder pension schemes (SHPs) are what are generally known as defined contribution arrangements.

These are pension schemes that provides retirement benefits based on the build up of a 'sum' of money, accumulated through the investment of contributions paid by both the employee and the employer.

They are in effect investment plans that provide an income in retirement. They are available to any UK resident who is under 75 years of age and can be bought from insurance companies, high street banks, investment organisations and some retailers (i.e. supermarkets and high street shops).

Policyholders contribute to their pension plan, the money is invested and a fund is built up through time. The amount of pension payable when the policyholder retires is really dependent upon:

  • the amount of money paid into the scheme;
  • how well the investment funds perform; and
  • the 'annuity rate' at the date of retirement.

An annuity rate is the vehicle used to convert the 'sum of money' into a pension.

Currently, the policyholder can retire at any age between 50 and 75. From 6 April 2010, the minimum age will rise from 50 to 55. When the policyholder does retire, they can generally take up to 25% of the value of their fund as a tax-free lump sum. The remainder of the fund must be used to buy an annuity with an insurance company.

Alternatively Secured Pensions (ASP)

Alternative Secured Pensions have only been available since 6 April 2006. Prior to then, everyone had to use their pension savings to buy an annuity by age 75. This is still the rule but there is now an alternative option, Alternative Secured Pensions.

An Alternative Secured Pension is a form of income drawdown. Instead of buying an annuity at age 75, an individual can continue to invest their pension savings and draw an income from their fund within laid down limits.

The minimum that must be drawn as an income from the fund is 55% of an amount calculated by applying the funds available to a table produced by the Government Actuaries Department (GAD). The maximum is 90%. The GAD table is based on the level of single-life lifetime annuity rates for a person of the same sex and aged 75. No allowance is made in the annuity rate used for any level of annual pension increases.

These rates were introduced with effect from 6 April 2007, following a review of Alternatively Secured Pensions by the Government. For the year 6 April 2006 to 5 April 2007, the rates were 0% (minimum) and 70% (maximum).

Further information about the GAD rates are available from the Revenue’s website at : http://www.hmrc.gov.uk/pensionschemes/gad-tables.htm

The pension year for an Alternatively Secured Pension is the 12 months from your 75th birthday and every subsequent 12 month period.

The maximum amount must be recalculated every new pension year. The reassessment continues to be made by reference to an annuity at age 75, irrespective of what actual age you have reached.

More general pension information can be obtained from the pension advisory service web site at ~ http://www.pensionsadvisoryservice.org.uk which is a wholly independent information service only and does NOT transact or set up pension plans themselves.

You can never start a pension plan or review your pension early enough.

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Contact us either by phone on ~ 01244 950 314 (Local Rate), use the quick ~ CALL BACK form or use the brief ~ ENQUIRY FORM, and then simply allow us to assist you with further information without any obligation whatsoever.

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