There are different types of Personal Pension Plans and the choice is as follows;
Contributions are invested with certain tax incentives to provide a fund at retirement. You do not have to choose in which form you wish to take your benefits until you decide to take them. Pension benefits can be taken at any age from your 55th birthday.
There is a maximum amount that can be put into your pensions each year known as the ‘annual allowance’. New rules are currently being put into place. If your total contribution(s) to all your pension arrangements in any tax year is likely to exceed £50,000, 100% of your earned income or £3,600 please contact us for further information.
Tax Relief – will normally apply to your contributions up to £3,600 per annum, £50,000 or 100% of your earnings (if your earnings are less than £50,000). Higher tax relief may apply for higher rate taxpayers but this will be reclaimed via your tax return. Under current legislation your pension fund grows in a tax efficient environment. Generally the only tax charged on pension investments is a tax paid on any dividends which are paid by investment in UK companies.
Transfers – As mentioned above it is possible to fund a Personal Pension using an existing pension fund. Some people wish to do this to move to a pension contract with lower charges, a wider range of in vestment funds, greater flexibility in how the benefits may be taken, or for a combination of these or other reasons. There are various rules regarding what pension benefits can and cannot be transferred, in some cases existing pensions may offer valuable guarantees which could be lost on transfer. For this reason we would always recommend an individual to seek independent advice before deciding to make any pension transfer.
Taking your Pension – Although as mentioned above, pension benefits can be taken from age 55 it is not necessary to actually retire from employment in order to draw your benefits from a personal pension policy. The general rules are either;
Rules regarding when you may draw your benefits and the maximum amounts available are currently being reviewed, therefore we would advise anyone that before drawing their pension benefits they should seek independent advice.
On death – In general most personal pension plans will treat the pension fund as follows if the policyholder dies before taking benefits from their pension. The pension fund will be paid as a lump sum and generally will not be subject to tax as long as the total of your pension funds does not exceed the lifetime allowance. Once again there are some exceptions to this rule and it is worthwhile reviewing the death benefits under any personal pension policy.
For more information on how we act on behalf of our clients, our payment structures and terms please read our Retail Client Agreement (here).