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Legal & General Group ,
30 June 2014

Frequently Asked Questions.

Thinking of starting a pension? We know that understanding how pensions work can be confusing. This page aims to answer some of the questions you’ll have, as well as giving you the reasons why you should consider starting to save for your retirement today.

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What is a pension?

A Stakeholder or personal pension is a tax-efficient way of saving for your retirement.
You can contribute to a pension if you’re employed, a fixed-contract worker, 
self-employed, or if you're not working but able to afford the contributions.
You can get a pension from a bank, building society, insurance company, or through a financial adviser. You can pay contributions regularly that are invested to build up your own pension fund. You can also make lump sum contributions whenever you like and transfer pension funds into your plan from other UK Registered Pension Schemes or from some overseas pension schemes.

When you take your benefits, you can use your pension fund to buy a ‘pension annuity’. This will pay you a regular income for the rest of your life. How much you'll be paid will depend on a number of factors including the size of your fund and the annuity rates at the time you take your benefits.

When you take your pension income you can normally choose to have up to 25% of your fund as a tax-free cash lump sum.

You can read more about our annuities here.

What is a Stakeholder pension?

Stakeholder pensions were introduced by the Government in April 2001. Their purpose is to encourage more people to save for their retirement by offering a simple and flexible personal pension. 

Stakeholder pension plans, like other pension plans, are tax efficient. Here's how:

  • You’ll normally receive tax relief on the money you pay into your pension plan until your 75th birthday (called 'contributions').
  • Any growth in your Stakeholder pension fund is free of UK income tax and capital gains tax. However, we cannot reclaim the tax paid on dividends from UK companies.
  • The law and tax rates may change in the future, and the value of tax relief depends on your individual circumstances.
How much can I pay into a Stakeholder pension?

Stakeholder pensions are very flexible.

  • You can pay in as little as £20 gross, which includes the basic rate tax relief paid by HM Revenue & Customs (HMRC).
  • You can pay contributions on a regular basis or make occasional lump sum payments.
  • You can stop, start, increase and decrease your payments as well as pay in lump sums without penalty.
  • You can transfer pension funds into your plan from other UK Registered Pension Schemes or from some overseas pension schemes.

There are certain limits on how much you can pay in and get tax relief on:

  • Up to age 75 you can make gross contributions of up to 100% of your relevant UK earnings or £3,600 if that’s greater, in each tax year, and still get full tax relief. After age 75, you won’t get tax relief on your contributions. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances.
  • The Annual Allowance for the tax year 2014/2015 is £40,000.  You can find out more about the Annual Allowance in the Stakeholder key features (PDF: 330KB) document.
  • Even if you’re already paying into an occupational pension scheme, you can also have a Stakeholder pension plan.

'Relevant UK earnings' means all of the earnings that count towards the amount that you can contribute to a personal pension.

This includes your salary, bonuses, tips, overtime and benefits in kind. In fact, most sources of income that are taxable. The main exclusions to this are income from pensions, State benefits, and certain controlling director payments.

There are no restrictions on the value of the total benefits payable from all your UK Registered Pension Schemes. However, HMRC will tax any benefits over your Lifetime Allowance at up to 55%. The tax rate depends on whether you take the amount above the allowance as cash or income. The Lifetime Allowance, which takes into account all benefits you receive from registered pensions schemes, is £1.25 million for the 2014/2015 tax year.

Certain circumstances may mean you have a personal Lifetime Allowance – these are known as fixed, primary or enhanced protection and you will have completed an HMRC election form if they apply to you.

How do I apply for a Stakeholder pension?

You can apply for a Stakeholder pension online but before you do, you must read the following documents. If you don't understand any point, please do not hesitate to contact us for further information.

You can print them and keep for future reference. We also recommend that you read the Money Advice Service's website. This will help you make sure that a Stakeholder pension is right for you.

On this website, we're not seeking to give you advice.  It's up to you to decide if this Stakeholder pension is suitable for you.  If you're unsure, contact us for more information.

Who can have a Stakeholder pension?
To have a Stakeholder pension with us, you must be under age 74 and normally a resident of the UK or a Crown servant or the spouse or registered civil partner of a Crown servant.
You can also open a Stakeholder pension on behalf of a child. See 'How could my family benefit from a Stakeholder pension?'
How will I know if I’m paying enough into my Stakeholder pension?

Our contributions calculator can help you work out how much income your pension contributions might give you when you take your benefits.

It's wise to regularly review how much you’re putting into any pension plan. Many people choose to gradually increase their contributions as they can afford to and as their earnings rise.

The value of your pension fund may fall as well as rise.

It’s particularly important to remember this if you’re close to taking your pension benefits. You also need to remember that your money is tied up until you take your benefits.

Once your pension plan is up and running with us we’ll send you an annual statement on the anniversary of your plan. This will tell you how much you’ve paid in during the last year and the current value of your pension fund. You should read this statement carefully.

What are the charges for a Stakeholder pension?
  • The Government has a maximum permitted annual management charge for Stakeholder pensions, which is currently 1.5% a year of the value of your pension fund for the first 10 years of your pension plan, and 1% a year after that. Please see our charges page for full details of our charges.
  • You may benefit from lower charges when you apply for our Stakeholder pension online. If you apply online through this website the temporary annual management charge, which normally applies to funds of £15,000 and under, won't apply.

    After reading the documents that make up the key features, it takes just 10 to 15 minutes to complete your application. You can apply online today.

    Please refer to the Stakeholder key features (PDF: 330KB) for more information.
Where can I invest my Stakeholder pension?
We have a wide range of funds, some managed by us and others managed by specially selected external fund managers. Visit our Pension fund choices page to find out more.

We also offer an investment option called a Lifestyle Profile. Visit our Funds made clear page to find out more.
What’s a Lifestyle Profile?

When setting up a Stakeholder pension you have the option of choosing a Lifestyle Profile. You can read more about Lifestyle Profiles on our Funds made clear page.

This is where your contributions are initially invested in funds for the potential of 
long-term growth and then your investment is gradually switched into funds that are considered to be lower risk, as you get nearer to your chosen retirement date.

How do I choose my pension fund?

There are several options available to help you choose your pension fund/s.

1. OUR DEFAULT OPTION

If you’re not sure or can’t decide right away, we’ll automatically invest your payments into our Multi-Asset Lifestyle Profile. Your payments will initially be invested in our 
Multi-Asset Fund. Then, as you approach your selected retirement date, we’ll gradually switch your investment into our Over 15 Year Gilt Index Fund and the Cash Fund, which are considered to be lower risk funds.

2. Research the basics first.

If you want to understand more about funds and Lifestyle Profiles take a look at our Funds made clear page. Then you can decide whether to choose a selection of funds or one of our Lifestyle Profiles.

3. Choose your funds.

If you’re confident choosing your own funds, you can review the fund information and factsheets on our Pension fund choices page. 

You should also read the Stakeholder key features (PDF: 330KB) and the Choosing your investment fund (PDF: 175KB) brochure. If you're still unsure which funds to choose, you may want to talk to an adviser. Visit www.unbiased.co.uk to find your local adviser.

What are the potential investment risks of a Stakeholder pension?

All investments carry an element of risk. Some of the risks are listed below. Please read the Stakeholder key features (PDF: 330KB) for further information.

You need to consider that the value of the units, which make up your fund, can fall as well as rise. This is especially important when you’re close to your chosen retirement date and may want to take less risk on your pension fund.

The amount of pension income provided by your pension fund will depend on a number of things, including the amount paid into the fund, charges, investment returns and the rates available to buy your pension income when you decide to take your benefits.

The fund or funds you choose to invest in will have specific risks. These risks are described in the Choosing your investment fund (PDF: 175KB) .

What are my options at retirement with a Stakeholder pension?

When you take your benefits you can normally take up to 25% of your pension fund as a tax-free lump sum. The remainder is used to provide a retirement income for you, for example by buying a pension annuity. This income will be taxable. You can buy a pension annuity from us or from another provider. You can read more about our annuities here.

You can normally take your benefits between the ages 55 and 99. The pension income from your Stakeholder pension will depend on a number of things, which will include how much you contribute, charges, investment returns over the period your contributions are invested for, your age and the financial market conditions when you take your benefits.

How do I transfer the value of my pension fund to an individual Stakeholder pension?

Before you decide to transfer from another pension plan we'd recommend you get financial advice first.

You need to consider if a transfer is to your advantage, so you need to look at several factors such as charges, investment choices and any guarantees that may be lost.

If you’re looking for advice on transferring a pension fund into your existing 
Legal & General Stakeholder plan you can contact an adviser. An adviser is a person who is not tied to any one financial institution and is qualified to give financial advice on life insurance, pensions, investments and other financial products. Visit www.unbiased.co.uk to find your local adviser.

How could my family benefit from a Stakeholder pension?

You may be able to pay up to £3,600 gross each tax year into a Stakeholder pension plan for your partner (regardless of whether they are working). This means they will have their own pension income when they take the benefits.

You could also start a Stakeholder pension plan for your children or grandchildren. Investing in one of our Stakeholder pensions on behalf of a child is a great way to help provide for your child’s future.

You can see how much your child's pension plan could be worth at retirement age by using our Stakeholder calculator for children.

Can I manage my Stakeholder pension online?
You can manage your account online so that you can see how your pension investment funds are performing.

You can also change funds, seven days a week, currently free of charge. Register for this service now.
What other pension products do you offer?

We offer a range of pension products that may be suitable for your needs. If you would like further information please contact us or your adviser. Visit  www.unbiased.co.uk to find your local adviser.


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