TPAS - The Stakeholder Helpline

Q. What is the most I can contribute?

A. There are no limits to the amount that you can pay in. You will get tax relief on any payments you make up to 100% of your earnings, or the annual allowance whichever is the lower. The annual allowance for the tax year 2008/2009 is £235,000.

Q. I am not earning - can I contribute to a stakeholder?

A. Yes, you can make contributions of £3,600 each tax year irrespective of earnings indefinitely.

Q. Do I get tax relief on my contributions?

A. Yes. You pay contributions net of basic rate tax (currently 20%) and the stakeholder pension provider reclaims the tax from HMRC. Higher rate tax relief can be claimed through your self assessment tax return after the end of the tax year. Those who are taxed under PAYE can obtain a form PP120 from the pension provider which can be returned to the member's tax office. The member's PAYE tax coding is then adjusted to give you the higher rate of tax relief during the tax year.

Q. Will I get tax relief even if I am a non-taxpayer?

A. Yes, all contributions from individuals will be paid net of basic rate tax. However, you should be aware that the maximum amount referred to earlier is a gross amount.

Q. Do my contributions to a stakeholder pension have to be on a monthly basis?

A. No, you can make contributions whenever you want as long as each contribution is a least £20 (unless your scheme has a lower limit). This means contributions can be regular or irregular, and on a weekly, monthly or annual basis. If contributions are made via your employer, you can only change the amount every 6 months (unless the employer agrees to more frequent changes, though you can stop making contributions at any time.

Q. Can I reduce or stop my contributions?

A. Yes. You can change your contribution amount or rate without being charged. However, if you are paying your contributions through your employer you may only be able to change the amount every 6 months, though you can stop making contributions at any time.

Q. Can I have my contributions back if I change my mind?

A. No. There is a cooling-off period of 30 days when you first join the scheme. Once this has expired the contributions cannot be returned to you. They must be used to provide benefits which can be taken anytime between 50 (55 from 2010) and 75. Alternatively benefits can be paid earlier in case of serious ill-health or in the event of death.

Q. Can I stop paying to my existing personal pension and start contributing to a stakeholder instead?

A. Yes. However, before making the personal pension paid up it is advisable to obtain details from the provider of exit charges and any other consequences of stopping contributions.

Q. My employer is not going to provide access to a stakeholder scheme. Is this allowable?

A. The employer has to provide access unless the business is exempt or has no relevant employees. The business is exempt if-:

• there are fewer than 5 employees. This may include company directors but does not include self-employed people.
• all employees are offered membership of an occupational pension scheme within 12 months of commencing employment. The scheme can exclude employees who are less than 18 years old and/or those who are less than 5 years from normal retirement age.
• all employees are offered access to a qualifying personal pension scheme. A qualifying personal pension scheme is one which meets the following conditions:
  • it is available to all employees who should have access to a stakeholder pension scheme (except those under 18);
  • the company contributes at least 3% of the employee's basic pay to the personal pension;
  • the scheme has no penalties for members who stop contributing or who transfer their pension; and
  • the company deducts employees' contributions from their pay and passes them on to the personal pension provider if the employee requests it.

• some categories of employee are offered membership of an occupational scheme within 12 months of commencing employment (under 18s and those within 5 years of normal retirement age can be excluded) and all other employees (under 18's need not be included) are offered membership of a qualifying personal pension scheme.

If the business is not exempt, access to a Stakeholder Pension Scheme must be provided to all 'relevant' employees, even if there is only one such employee.

Relevant employees are all employees except the following:

• those who have been in this employment for less than three continuous months;
• those who are members of the company's occupational scheme;
• those who could not join the occupational scheme because its rules don't admit people if they are under 18 or they are within 5 years of the scheme's normal pension age;
• those who could have joined the occupational pension scheme but chose not to do so;
• those who did join the occupational pension scheme but then opted out;
• those whose earnings have fallen below the National Insurance lower earnings limit (currently £90per week ) for at least one week in the last three months; or
• those who cannot join a stakeholder scheme because of Inland Revenue restrictions (e.g. the employee does not normally live in the UK).

As you can see the answer to this question is very complex and if you need clarification, please give the Stakeholder Helpline a call. Tel;0845 6012923

Q. How can I find a suitable scheme to join?

A. There are a number of ways of finding out about the range of SHP schemes available:

• contact a number of providers
• if you are an employee, your employer may have to provide access to a SHP scheme;
• newspaper advertisements
• through an Independent Financial Adviser

The Pensions Regulator will provide a list of approved schemes. You may write to them at Napier House, Trafalgar Place, Brighton, East Sussex, BN1 4BY, telephone them on 0870 606 3636 or access their web site on www.thepensionsregulator.gov.uk

A. The question to be considered is essentially whether the National Insurance rebate which would be paid into your stakeholder pension is likely to produce a higher pension than the State Second Pension given up by contracting-out. It is likely that you will need financial advice on this issue if you are considering contracting-out. Your stakeholder scheme provider may be able to advise you further.

Q. Can I invest in more than one pension including my employer's final salary pension scheme?

A. Yes. There is currently, no limit to the amount that can be invested in pension arrangements. However, tax relief will only be given on contributions up to the level of a person's salary. This is subject to an annual limit of £235,000 for the current tax year (2008/2009), and remember that you can contribute £2,880 (£3,600 including tax relief) a year into a stakeholder pension scheme even if you are not earning.

There is also an overall 'lifetime allowance' on the total amount of money that you can save within your pension arrangements that will be free of any tax charge when you come to draw your pension benefits. This is currently set at £1.65 million for the current tax year (2008/2009) and this will rise in stages to £1.8 million by the tax year 2010/2011. The 'lifetime allowance' includes the value of all your current or old pension arrangements you have from previous employments.

A. 'Carryback' has now ceased and the last chance to use this facility was on 31st January 2006. However, if you are a member of a Retirement Annuity Contract (RAC) you can still use 'carryback' but this will cease on 31st January 2007.

A. Yes, you should make a choice from the options available. However, if you fail to do so, there is a fall back option which will be applied automatically by the scheme manager and you should be aware of what this is. Stakeholder pensions must provide 'lifestyling' for anyone who does not want to make a choice. What this means is that at least five years before you retire, your pension savings will start to be moved into less risky investments. This will help to guard against falls in investment values as your retirement approaches. However, you can, if you so wish, request that your funds are not moved into 'lifestyling'.

Q. What information can I have about the investment of my stakeholder pension scheme?

A. Within 7 months of the end of each scheme year your stakeholder pension scheme trustees/managers must publish an annual report. This must contain an investment report which will include a review of the investment performance of the scheme showing an assessment of the nature, disposition, marketability, security and valuation of the scheme's assets.

You are entitled to receive a free copy of the annual report within 2 months of a written request. In addition, the scheme trustees/managers are obliged to prepare and maintain a statement of investment principles containing their policy on:

• the kinds of investments to be held;
• the balance between different kinds of investment risk;
• the expected return on investments;
• the realisation of investments;
• the extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments; and
• the exercise of the rights (including voting rights) attaching to investments.

You are entitled to receive a copy of the latest statement of investment principles within 2 months of your request. The trustees/managers can make a charge for this, not exceeding the expense incurred in copying, posting and packing the statement.

A. The first thing to be appreciated is that you cannot get your payments refunded. While occupational schemes can have a rule which allows you to have a refund if you leave within 2 years of joining the scheme, this does not apply to stakeholder schemes.

Equally, of course, your employer cannot reclaim any money paid by the company into your account.

The choices available to you are:

• leave your account to continue to rise or fall according to how it is invested. The only charge that can be levied is the normal annual charge.
• you may be able to leave your account in the scheme and continue to make contributions to it if the scheme rules allow (it is expected that most schemes will allow this facility but you would need to check this out). Your ability to continue contributions will also depend on whether you have joined another scheme. If you have joined an occupational scheme then you need to check that the concurrency rules (see an earlier question) will permit you to continue paying into the stakeholder scheme.
• you can transfer your account into another approved pension arrangement. No charge or penalty can be levied by the stakeholder scheme for doing this. However, there may be charges applied by the scheme you are transferring to and you should consider seeking financial advice.

Q. Can I transfer my existing pension benefits into a SHP and, if so, would I be charged a penalty by my existing scheme?

A. Yes, you can transfer your existing pension benefits into a SHP. There may be an exit charge relating to your existing pension arrangement. You will need to check with your existing pension provider and you may need to take financial advice. However, there will be no charge on entering the SHP.

Q. Will there be a charge for transferring out of a SHP.

A. No. There will be no charge or penalty for transferring out of a SHP.

A. No. This is usually referred to as waiver of premium protection and may not be provided within a SHP, or any scheme designated as a stakeholder, which commences on or after 6 April 2001. You can take out a separate policy to cater for this situation. Those who set up a personal pension before 6th April 2001 with a waiver or waiver option may continue with their waiver of premium protection on the old basis.

Q. Can I access my stakeholder pension funds at any time if I need cash for an emergency?

A. No, you cannot treat your SHP like a bank account. The earliest age from which you can draw benefits is 50 (55 from 2010). Benefits may be taken before this age in certain circumstances - i.e. incapacity or certain recognised occupations which have an earlier retirement age.

Q. Do my contributions buy me death benefits?

A. You can allocate up to 10% of your pension contributions for the purpose of buying life assurance. This is cheaper than doing it outside of the scheme because you get tax relief. Whether or not you buy life assurance, the full value of your accumulated contributions will be paid in the event of your death before retirement.