Personal Pensions
A personal pension plan helps you save money for retirement and is available to any United Kingdom resident who is between the ages of 16 and 75 (Children under 16 cannot start a plan in their own right but a Legal Guardian can start one on their behalf).
You, in conjunction with your adviser, choose the pension provider and make the arrangements for paying the contributions to the plan. You can start a personal pension even if you have a workplace pension or if you’re self-employed and don’t have a workplace pension. You don’t have to be working to take out a Personal Pension Plan and you can also provide a Personal Pension Plan for your spouse/partner or your child/children.
When you contribute to a Personal Pension plan, your money is invested by the pension provider (usually an insurance company) to build up a fund/pension pot over a number of years.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.
Tax Relief
If you’re a basic rate taxpayer, your pension provider will claim back Income Tax at the basic 20 per cent rate on your behalf on the contributions you make and add it to your pension pot. Higher rate taxpayers claim the additional rebate through their tax returns.
I already have a pension so I’ll be fine, won’t I?
It is very important that you review the benefits of your scheme and the status of your personal plan, to establish if it is on track to give you the pension you want.
If you are in an employer’s scheme you will be able to obtain a statement from either your employer or the pension provider outlining the scheme benefits. Alternatively, contact us and we can analyse your current provisions and make any recommendations with the aim of achieving your goals.
For a personal pension, the level of contributions you have been making to your scheme, investment performance and charges will determine the size of your pension, however, as the years go by, your fund should increase and could eventually get to a size where the investment returns come into play. The larger your fund, the more advice you may need on managing the fund for optimum performance, because every percentage point increase or decrease could potentially represent thousands of pounds.
We will be pleased to regularly assess your benefits to establish whether they still have the potential to meet your objectives, and make appropriate recommendations to you.
What Will My Pension Be Worth?
The size of your pension pot will depend on:
- The amount of money you paid into the plan
- The performance of the plan’s investments
- Charges payable under the plan
- Advice charges (where applicable)
Frequently asked questions
- What is the maximum I can contribute?
The annual allowance is the maximum you can pay into pension each year. It is the minimum of your relevant earnings or £60,000 (2023/24). If you have no earnings or relevant earnings below £3,600 gross, then the maximum you can pay into pension is £3,600 gross.
- When can I access my pension?
Currently you can access your pension from age 55. This will be changing in April 2028 to 57, 10 years before state pension age.
- What happens if I die?
If you die before age 75 and you have not started to take 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.
It is possible to continue past age 75 without taking benefits. If you die after age 75 your pension pot can still be passed to a nominated beneficiary free of inheritance tax, however if paid as a lump sum, tax at the beneficiary’s marginal rate will apply (2023/24). If it is paid as an income to your spouse or dependant there will be no initial tax charge, but any income paid would be subject to income tax.
- Is there a large fund availability?
Personal Pensions tend to have a larger variety of funds available compared to Stakeholder plans but cannot invest directly into assets as can be done through a SIPP, e.g. direct shares, commercial property, etc.
The level of service I receive from Kirstie at Woodwards is excellent. She is extremely knowledgeable and has helped me deal with numerous financial issues over the past 18 months. I recommend anyone to use Kirstie for her expertise and professionalism.
