Apt Financial Management

Stakeholder Pensions

A Stakeholder Pension is a tax efficient way for anyone under 75 to build a retirement fund through either regular or lump sum contributions. A Stakeholder plan has to meet basic standards which are laid down by Government for contributions limits, low charges, flexible terms and conditions. They can be suitable for people who are employed, self-employed or not in employment.

Are there any tax benefits?

PAUL TOON - Independent Financial Advisor

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The pension fund grows free of UK income and capital gains tax and only a small amount of corporation tax is paid on dividends from UK Shares held within the fund.

However you will receive income tax relief on your payments (up to a maximum limit). Tax relief is at the basic rate of tax (currently 20%) and you will receive this even if you’re a non-tax payer. For example, as the basic rate of tax is 20% for every £80 you pay into your plan it will increase to £100

Higher rate tax payers can claim an additional amount of up to 20% through their tax return.

When can benefits be taken?

You can start taking an income from the age of 55. You convert your pension fund into income by buying an annuity. There may be certain circumstances where you may be able to retire earlier and buy an annuity before the ages specified. An example of this would be if you can’t continue working because of ill health.

What are the choices on retirement?

You have two choices when you retire

  • You can use your entire fund to buy an income for life (annuity)
  • Take up to 25% of your pension fund as a tax-free cash sum and use the remaining fund to buy a smaller income for life.

What are the risks of Stakeholder Pensions?

The returns from Stakeholder Pensions are not guaranteed, as the growth of the fund or the amount of income generated on retirement cannot be predicted accurately.

A Pension is a long term investment the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Apt Financial Management, 4 The Willows, Hulland Ward, Ashbourne, Derbyshire DE6 3EW
Phone: 01335 370 515