Personal Pensions A Personal Pension is independent of an employer. Unlike a group Personal Pension or a State Pension scheme it is fully portable. In other words if you change your job, you take your pension scheme with you. One of the main advantages of this scheme is that you can obtain the benefits before the state retirement age and you get back what you put in plus the potential return from the investments.
A Personal Pension Plan is an extremely tax efficient method of saving for your retirement, main benefits being as follows:-
· Tax relief on contributions at your marginal rate
· Tax efficient growth of the fund in which your contributions are invested
· Tax free cash - up to 25% of the Premium Plan Fund can be taken as a tax free lump sum on retirement.
The personal pension is considered appropriate particularly where there is the non-availability of an occupational scheme.
The Government has recently issued a Green Paper on welfare reform which includes proposals to introduce a State Second Pension to replace the existing State Earnings Related Pension Scheme (SERPS) from April 2002. Stakeholder pensions are also planned to be available from April 2001 to support individual pension provision and are particularly designed to help those on middle incomes (between £9,000 and £18,500 per annum) and may also benefit those on higher incomes. They are expected to provide low cost, flexible and secure pension arrangements. Group Personal Pensions (GPP) A group Personal Pension (GPP) is set up and organised by the employer. This takes some of the strain off the individual, as they do not have to worry about adjusting payments in regard to their situation. As like the Personal Pension there are no set limits on the retirement benefits, instead contribution limits are set based on a percentage of net relevant earnings and the contributors age for each tax year. Also the employer can but is not forced to contribute. Stakeholder Pensions Regarding employer’s schemes in particular, from April 2001 it will become an employer’s responsibility to set up a scheme where there are generally 5 or more employees, (this can include an employed business owner). The Government are planning to introduce a new type of pension arrangement – Stakeholder Pensions – from April 2001. Although the final arrangements are not yet in place it appears that if there is a Group Personal Pension in place, then the employer must contribute a minimum of 3% to be exempt from offering a Stakeholder. If there is a different type of occupational scheme available to employees then the employer in most cases should also be exempt from Stakeholder, although this could depend on how long the employee has to be in service before being eligible to join the scheme. |
Pensions 