Here we explain about all the options available when it comes to pension planning and an overview of what they mean. Remember, if there is anything that you would like more clarification on then feel free to call us on 0800 137 832.

SIPPS - Self Invested Personal Pensions

This type of pension allows you to make your own investment decisions (usually aided by a financial adviser) and offers more investment choice. With a traditional pension plan your investment is made up of the funds offered by the pension provider, through a SIPP you can invest in a wider variety of investments such as direct holdings of shares or commercial property etc. Although you receive similar tax benefits to traditional pensions, SIPP’s tend to have higher charges due to the investment freedom it allows.

If you want to invest in a SIPP, it’s important that you seek professional advice through SFS. The first step is to understand your attitude to risk by taking our simple questionnaire. Alternatively, call us on 0800 137 832 to speak to one of our advisers.

Stakeholder Pensions

Stakeholder Pensions were launched by the Government in April 2001 to encourage more consumers to save for their retirement through a simple, low cost and flexible personal pension.

Stakeholder Pensions must satisfy a number of minimum government standards to ensure that they offer value for money and flexibility. These standards include:

• For people who join a stakeholder pension scheme on or after 6 April 2005 the cap is an annual management charge of 1.5% for the first 10 years, which will reduce to 1% from then onwards if these members remain in the scheme.
• The stakeholder pension contract must not have charges for members transferring into or out of the stakeholder pension scheme.
• All stakeholder pensions’ schemes must accept contributions of £20 or more, though some may accept lower payments.

Note: The annual charge for members who purchased their Stakeholder Pension scheme before 6 April 2005 will remain at 1% for as long as they remain in the scheme. However, if such members move to another stakeholder pension scheme on or after 6 April 2005, the new charge cap of 1.5% will apply for the first ten years of membership of that new scheme.

Company Schemes

An employer can offer an occupational pension scheme, such as final salary pensions where the benefits are related to the member’s earnings before retirement and length of service, this is known as a defined benefit scheme.

Alternatively, an employer may offer an occupational money purchase scheme which provides a lump sum at retirement from which the member must provide themselves with an income. This type of scheme is known as a defined contribution scheme as the member and the company usually make pre-determined contributions to the scheme. At retirement, the fund is used to provide a pension, this could be in the form of an annuity but there are other options available.

Personal Pensions

Personal Pensions were launched by the government in 1988 to encourage more people to save for their retirement by providing a lump sum at retirement from which an income must be provided.

Prior to 1988, self employed people and those who were not eligible to join company pension schemes could only invest in retirement annuity contracts. Personal Pension charges have fallen in recent years; they can still be more expensive than stakeholder pensions which cannot charge an AMC of more than 1.5 per cent a year in the first 10 years, and 1 per cent thereafter. The investment choices open to Personal Pensions tends to be greater than that of a stakeholder due to Personal Pensions having no restrictions on charges.

Superannuation Scheme

This is very similar to a final salary occupational scheme and as such the income provided by this scheme is based on the member’s earnings before retirement and there number of years service. In this type of scheme employees are typically provided with 1/80 or 1/60 of their final salary for each year of service.

State Pension Benefits

The basic State Pension is a government-administered pension. It is based on the number of qualifying years gained through National Insurance contributions (NICs) you’ve paid, are treated as having paid or have been credited with throughout your working life.

The State Pension age is 65 for men born on or before 5 April 1959 and 60 for women born on or before 5 April 1950. The State Pension age for women born on or after 6 April 1950 but before 6 April 1955 is rising from 60 to 65 between 2010 and 2020. The State Pension age for women born on or after 6 April 1955 but before 6 April 1959 is 65. State Pension age will increase for both men and women from age 65 to 68 between 2024 and 2046.

If entitled, you can get the basic State Pension when you reach State Pension age. You qualify by building up enough ’qualifying years’ before State Pension age.

A qualifying year is a tax year where you have sufficient income to pay National Insurance Contributions (NICs), or are treated as having paid or being credited with NICs. Currently men normally need 44 qualifying years and women normally need 39 to get the full basic State Pension.

In 2008-2009, the full basic State Pension is £90.70 a week for a single person and £145.05 a week for a couple, but your individual circumstances may affect the amount you get.

A State Pension forecast will tell you the current value of your State Pension and the amount you may get at State Pension age - use our Pensions Calculator to find out more or visit the Direct Government website.

If you would like us to call you, just click here.

Alternatively call:
0800 137 832

Our simple guide will help you find out how Skipton Financial Services could help you plan for retirement.

Work out how much retirement income you may receive from your personal pensions.

Assess your attitude to risk - take our questionnaire

To find out more about any of
the services we’ve mentioned
simply:

• Contact your SFS Financial Adviser
• Call a member of our Client
  Help Line on 0800 137 832
• Visit your local Skipton
  Building Society branch to
  arrange an appointment with
  an SFS Adviser

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