Stakeholder Pensions – Guidance and Information
A secondary stakeholder pension is designed to raise your retirement earnings to afford you a greater life-style after you stop working. To put it simply they are a relatively inexpensive way of increasing the funds available in your retirement. Your existing job may have a work pension that fills this need. The benefits are made to help individuals on low to moderate earnings. Stakeholder pension charges are low (limited to 1%) and you can invest from just ?20 per month, although your company could make additional contributions. You can obtain one from your building society, standard bank or perhaps an insurance company. Further organisations for instance trade unions also provide stakeholder pensions for their members. If you are employed, your employer needs to provide entry to a stakeholder pension unless the company is exempt from this requirement. There’s no fee to change stakeholder pension supplier.
Exemptions Include:
-The company has fewer than 5 employees.
-The organization offers an occupational pension scheme for all of their employees to sign up for after their first 12 months of employment
-The company may also be exempt in the event that they offer to place a minimum of 3% of each employee’s earnings within another form of non-state pension for their personnel.
If you are self-employed, you’re entitled to a basic State Pension, but you cannot get any additional state pension. It may therefore be wise to think about a separate stakeholder pension to give you a higher income then a basic state pension upon retirement.
If you are an employee, you can decide to be contracted out of your additional State Pension. It will still mean you pay National Insurance Contributions at the full rate. The Inland Revenue will then pay a National Insurance Contribution rebate straight in to your stakeholder pension scheme. The size of the rebate is based on earnings as well as age so the older you are the greater the rebate will be.
Tax Relief on Stakeholder Pensions
Anybody paying contributions into a stakeholder pension is entitled to tax relief on their contributions. For someone on the basic rate of income tax, every ?100 placed in your pension will earn a rebate of ?22. For the highest level of income tax the same ?100 will earn a rebate of ?40.
What’s The Maximum I Can Contribute?
You can contribute a maximum of ?3,600 a year towards your pension, including any contributions made by your employer and any tax relief you obtain from the Inland Revenue. It does not include the National Insurance rebate if you’ve chosen to be contracted out of additional state pension schemes (such as SERPS or State Second Pension). If you want to contribute more, please refer to leaflet ‘IR3 – Personal Pension Schemes – a guide for members of tax approved schemes’ which is available from the Inland Revenue.
For further pension information why not explore InterPensions.co.uk
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