Personal arrangements can be made via either
Personal Pension Plans or Stakeholder plans.
Using pensions is generally the most efficient
way of planning for your retirement. This
is because there is tax relief on your contributions,
which means that the Government will pay
at least £22 for every £100
that you pay.
When you come to take your benefits you
can either purchase an annuity, which will
give you a higher income in retirement,
or you can opt for a number of more complicated
but more flexible possibilities. Income
Drawdown and Phased Retirement are appropriate
for funds in excess of £250,000. They
can give you much greater flexibility over
how you take your benefits and may help
you pass them on to your children. Due to
their complexity we strongly recommend full
advice is taken before choosing for these
options.
In addition to this although Gordon Brown
has removed some of the tax advantages within
the fund they are still more favourably
taxed than most other types of investment.
You can currently pay up to £3,600
per annum without having to prove your earnings,
and can pay more depending on your age and
income.
The current limits are:
Age at start
of tax year
|
Minimum percentage
earnings
|
35 or less
|
17.5
|
36-45
|
20.0
|
46-50
|
25.0
|
51-55
|
30.0
|
56-60
|
35.0
|
61-74
|
40.0
|
Anyone, irrelevant of how much they earn,
or indeed if they are not employed, can
contribute up to £3,600 in any tax
year. However, earners are able to contribute
over and above £3,600 up to a maximum
determined by their age and the Earnings
Cap, currently £102,000, based on
the table shown above.
More information can be found at the following
external site: http://www.opas.org.uk/TypesOfPensionScheme/PersonalPensionPlans/
There are a number of differences between
Personal Pension Plans (PPP) and Stakeholder
Plans but the most important is charges.
A Stakeholder plan effectively has a maximum
charge of 1% per annum while a PPP can charge
more. There are reasons for wanting to pay
more for your plan but you have to be careful
that they are appropriate for your own circumstances:
- You can access a range of externally
managed funds.
- You can invest into a Self Invested
Personal Pension Plan so that you can
buy and sell your own stocks and shares
or invest into commercial property.
In 2006 it will all change again and if
you either have a fund in excess of £1.5
million or are likely to then you should
take advice as soon as possible to protect
your pension.
|