All personal pensions are subject to
rules on eligibility, contributions and when you can withdraw funds.
When it is time to retire you will need to use your pension pot to buy an annuity from an insurance company, which will provide or secure your regular income for the rest of your life. You can also buy a spouse or dependant's benefits (but this will reduce your own annuity).
Personal pensions
Personal pensions can be bought from insurance companies, high street banks, investment houses and some retailers. Generally you will pay for investment into an insurance policy. The money is then invested on your behalf, with relatively little input from you, when it is time to retire you will usually buy an annuity from the same company.
A personal pension scheme will provide one or more of the following benefits:-
- A pension during retirement, which can start at any age between 50 (rising to 55 by 2010) and 75
- A tax-free lump sum on retirement of up to 25% of the pension fund which has been built up
- A pension payable to a widow, widower, civil partner or other dependant(s)
- A tax-free lump sum, payable on death before retirement, to a widow, widower, civil partner or other dependant(s).
Stakeholder Pensions
Similar to Personal Pensions, these have been designed to incorporate a set of minimum standards laid down by the Government including:
- A charging structure that is capped: a maximum of 1.5% a year for the first 10 years and 1% a year thereafter
- Unlike many personal pensions, there can be no penalties on stopping contributions or on transferring the benefits to another scheme
- The minimum contribution cannot be greater than £20 in any period whether regular or a one-off payment
- At retirement, you have the option to take a quarter of the fund as a tax-free amount
- Retirement can be at anytime between age 50 and 75 (55 and 75 from 6 April 2010).
Stakeholder Pensions can be provided for a spouse/partner or children. In respect of the latter, the policy reverts to the child/children at the age of 18.
Self Invested Personal Pensions (SIPPs)
A
SIPP is a personal pension that allows you to select and manage your own investments, subject to the usual pension rules regarding contributions and eligibility.You include a variety of investments such as,
- individual shares
- stock-market and property funds
- futures and options
- REITS
- unquoted shares
- gilts (government bonds) and company bonds
- cash
- commercial property
SIPPs are available to those who are contributing to an occupational scheme at the same time and also offer you more flexibility than a traditional personal pension when it is time to retire. If Fidelity provide's your company pension don’t forget your dedicated pensions site with it's planning tools and pension calculator.
