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Personal Pensions
Pensions are a long term investment, and the tax man is on your
side. So be sure to take full advantage.
Who are pensions for?
Pensions are for anyone who wants to provide an income for themselves
when they reach retirement age. The State pension is small and if
you don't have access to a company pension scheme, the only real
alternative is to provide one for yourself. The good news is that
the government realises that people need help, so it has provided
generous tax breaks for those who decide to help themselves.
Why should I start a pension?
The basic State pension does not enable most people to maintain
their standard of living. This situation is likely to get worse
as there are more pensioners and people are living longer. It's
a case of there being fewer workers to pay in to the State scheme
and more pensioners taking money out. So the only way to make sure
you have enough money to live on comfortably is to be a member of
an occupational pension scheme or to provide a pension for yourself.
Stakeholder Pension
A stakeholder pension scheme is a type of low-cost pension scheme
that allows you to save in a tax-efficient way for your retirement.
You simply contribute during your working life, then when you come
to retire, the funds which you have built up provide you with an
income for the rest of your life.
What are the advantages of saving for retirement with a Stakeholder
pension?
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Your contributions receive income tax relief, normally at your
highest rate
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Your investment will grow free of UK capital gains tax
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You can take up to 25% of your fund as a tax free lump sum
at retirement
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Your dependants do not normally have to pay tax on any cash
lump sum they receive if you die before retirement
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Maximum charges of 1% of the fund in the Stakeholder plan per
year
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Easy to transfer funds from other plans into a Stakeholder
scheme
What are the maximum and minimum amounts I can pay?
The minimum contribution can be as low as £20 per payment
(i.e. £20 per month).
The maximum contribution is based on limits that are set by the
Inland Revenue. You can contribute up to £3,600 gross a year
provided you are under 75, a U.K. resident and not a member of an
occupational scheme. You may be able to contribute if you are a
member of an occupational scheme provided you earn less than £30,000
and are not a controlling director. You may be able to contribute
more than based on a percentage of your earnings. The maximum contribution
is a percentage of net relevant earnings (which broadly speaking
are the taxable profits from being self-employed or the before tax
earnings from your job) in a tax year. The percentage changes as
you grow older and the following table sets out the different levels.
The percentage includes any contributions made by your employer.
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Age at the start of the tax year
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Percentage of net relevant earnings
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35 or less
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17.5%
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36-45
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20%
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46-50
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25%
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51-55
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30%
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56-60
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35%
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61-74
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40%
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Although we hope that this site has been very informative for you,
pension requirements will be different for everyone, and it is important
that you seek expert advice regarding the most appropriate course
of action.
Please contact us to arrange a meeting
if you wish to discuss your pension requirements.
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