Personal Pension Planning

With a personal pension you pay regular amounts or a lump sum to the scheme provider who invests it on your behalf. The companies that sell pensions will charge you for starting up and running your pension. Therefore some of the money that you pay to the pension provider will not go into your pension fund but will be paid to the pension provider in the form of charges. As these charges can vary significantly it is important to shop around.

When you retire you use the fund you have built up to buy a regular pension for the rest of your life from an insurance company. This is known as an annuity. You can purchase your annuity from any company, so again you should shop around before you decide to buy.

The government gives you tax relief on your contributions to increase the value of your pension as detailed below.

• Open to Directors of small companies
• Max of 11 members
• Potential to convert commercial business premises into the SSAS
• The SSAS can provide loans to the business and may also borrow money
• There are restrictions on time and % of money loaned/borrowed

You cannot invest in: Antiques, works of art, furniture, rare stamps, Yachts, Jewellery, rare books, gold bullion, vintage cars, gem stones, Krugerrands, oriental rugs or fine wines.

• Similar to Defined Contribution scheme
• Saver contributes into a pot
• On retirement the pot of money is then used to purchase an annuity
• New government rules have meant that this scheme can also be used as a top up to company schemes

Stakeholder pensions were introduced by the Government in April 2001 in an attempt to encourage more people to save for their old age. They have much lower charges than old style pensions therefore more of the money you put into to your pension is invested into your fund rather than being paid in charges to the pension provider.

All businesses with 5 or more employees must provide stakeholder pensions. However the employer DOES NOT have to make contributions they simply deduct the employees contributions and pay them into the pension fund on their behalf.

Your stakeholder pension scheme puts your contributions into stocks and shares. When you retire you use this fund to buy a pension from a pension provider. Most employers must provide you with access to a stakeholder pension provided that you earn above the lower earnings limit. You tell your employer how much you want to pay and how often. Stakeholder pensions are very flexible. If you want to stop, reduce or increase your contributions you can do so.

You can invest up to £3,600 in your plan each year.

There is tax relief on payments e.g. with basic rate income tax of 22% every £100 into your pension scheme costs £78. The premiums are paid net of basic rate income tax. Providers will reclaim the basic rate tax on a quarterly basis direct from the Inland Revenue and add it to the individuals pension fund. This amount can be reclaimed even if the individual is a non tax payer.

Try some figures with our Pensions savings calculator.

For investors:

• With a greater understanding of investments and levels of risk associated with investments
• Prepared to get involved in the investment decisions

Aimed at wealthier individuals

Tax free savings accounts

Three types:

• Cash only maximum £3,000 (£3,600 from 2008)
• Maxi (Stocks) maximum £7,000 (£7,200 from 2008)
• Mini (Cash & Stocks) £3,000 cash and £4,000 stocks
  (changing to £3,600 cash and £3,600 stock from 2008)

Savings are free of capital gains and income tax:

• You could build up a tax free nest egg
• Allowed one per year
• Are planned to continue to 2010