Employers who do not provide satisfactory alternative arrangements
must provide access to a Stakeholder Pension Scheme by the 8th
October 2001 or FACE FINES! - See 'A
Guide for Employers'
EMPLOYERS
If
you simply want to avoid fines and formally designate (choose)
a Stakeholder Pension Plan, you must, before 8th October 2001,
do the following:
1.
Consult your employees first and advise them that you are about
designate a Stakeholder scheme.
Download
a sample letter to give to your employees
2.
Complete a Designation Form and return it to us.
Download
a Designation Form
3. We will then send you a Certificate issued by your chosen
Stakeholder Pension provider confirming your designation. You
should then be fully compliant with the legislation.
Employers
are not required to contribute to Stakeholder but must provide
a payroll deduction facility to collect employee's own contributions
and pay them to the Stakeholder provider.
If
you want chapter and verse on Stakeholder Pensions you can obtain
further information from the following links:
Nigel
Bourke & Co can provide independent advice to both Employers
and individuals on this subject.
INDIVIDUALS
As
long as you are under age 75 and UK resident, you can have a
Stakeholder Pension and automatically benefit from basic rate
Income Tax relief, which will be added into the plan on your
behalf. The plan is ideal for the employed, the self-employed,
children, housewives, carers and almost any individual who wants
to build up funds in a tax efficient manner. The planholder
can have access to the benefits at any time between the ages
of 50 and 75 which can be taken as a tax free lump sum of upto
25% the fund plus an income for life. The income is assessable
to Income Tax in the normal way.
The
availability of tax relief at source means that if you want
to invest the maximum of £3600 per tax year the actual
cost to you will be only £2808. The balance of £792
is paid to the pension provider by the Inland Revenue on behalf
of the planholder. If you prefer monthly contributions the maximum
monthly payment if you need to stick to the £3600 limit
is £234 net, which would be topped up by a further £66
to £300 by the Inland Revenue.
You
may be able to contribute more than £3600 if you have
a source of earnings subject to age and proof of those earnings.
The maximum contribution allowed is 40% of earnings for individuals
aged 61 or over at the start of the tax year.
If
you are self-employed, contributions to personal pension arrangements
are now made net of basic rate tax relief. If you are a higher
rate taxpayer at 40%, you can claim the additional 18% tax relief
through your self-assessment form.
The
benefits can be taken once the planholder has reached their
50th birthday and, under current rules must be taken by the
age of 75 at the latest. This upper age may be subject to change
in the future.
If
the planholder is already over 50, then it is possible to pay
a contribution and to take immediate benefits. For example,
if a male aged 55 were to make a contribution of £2,808
in March and a further contribution in April, i.e. in two separate
tax years he would have invested a total of £5,616 net
of tax potentially within the space of a month. The taxman would
top up each contribution to £3,600 bringing the gross
amount invested for the planholder to £7200.
Assuming
that there were to be no growth on the underlying investment,
he could take a tax-free lump sum of 25% of the fund value i.e.
£1,800 immediately. The remaining £5,400 must be
used to provide a lifetime income by buying an annuity. At June
2001 rates this would provide an income of approximately £400
a year gross, guaranteed for life. If the tax-free lump sum
of £1,800 is deducted from the total net of tax contributions
of £5,616 the effective net cost of producing this income
is only £3,816. This represents a return in the region
of 10.5% per annum guaranteed for life! This example assumes
only two contributions. The amounts would be significantly enhanced
if contributions are paid over a longer term and the fund grows
in value!
If
you already have a Personal Pension Plan, you may want to ensure
that your provider has lowered its charges to match Stakeholder
Schemes and consider redirecting your contributions if this
is not the case. You should take into account any penalties
which may be incurred for stopping the contributions including
the potential loss of any loyalty bonuses which may apply in
the future.
If
you are already a member of a company pension scheme, you may
still be eligible to contribute to a Stakeholder Plan at the
same time as long as you are not a controlling director or earning
more than £30,000 per annum. You can even contribute to
an AVC or FSAVC at the same time!
Click
here for a personal quotation
Click
here to download an application form
EXPATRIATES
As
a low cost alternative to expensive offshore investment plans,
if you have a spouse or family resident in the UK, you may prefer
to contribute to the new style Stakeholder Pension Plan on their
behalf and still obtain tax relief. The tax relief of up
to £792 per annum is paid into the plan on behalf of the
planholder even though, as the person paying the contributions,
you are a non-taxpayer and living outside the UK. It also doesn't
matter whether the planholder pays tax as long as they are under
the age of 75 and UK resident!
This
means that, as an expatriate, you could pay up to £2,808
per annum for each of your family members. Since there
does not need to be any commitment to make on-going future contributions
you could decrease or even miss future payments without any
penalty whatsoever. There are no charges to set up
the plan and no exit charges. The only charge which can
be levied is a maximum of 1% per annum of the fund value. A
plan can be established for as little as £20!
As
a result of recent changes in legislation, it is now possible
for us to set up a Stakeholder Pension Plan for you electronically
without the need to complete and sign an application form and
Direct Debit Mandate. A simple on-line form is all that
is required. However, this can only be done once we have sent
a personal illustration to you and you have confirmed to us
that you want to proceed.
Click
here for a personal quotation
CHILDREN
For
the first time ever it is now possible for a child to invest
in a Pension Scheme. Anyone can open a Stakeholder scheme on
behalf of a child, but until the child reaches the age of 18,
the child's parents or legal guardians are responsible for the
plan.
A
Stakeholder Pension opened on a child's behalf offers exactly
the same features as those available to adults;