Individual Pensions FAQs

Pension plans can be one of the most tax-efficient ways of saving for retirement.

The Government will normally give you tax relief that may help increase the value of your plan.

If you're a basic rate taxpayer and pay £80 into your plan each month, the Government will automatically top up your investment with an additional £20.

There might be further tax relief if you're a higher or additional rate taxpayer. You can claim this when you fill in your annual tax return, or by writing to your Tax Office.

Work out how much you could save in tax relief when paying into a pension.

There are other tax advantages offered by a pension plan -

• Investments in pension plans are generally free of UK income and capital gains tax, although we can't reclaim tax deducted at source from the dividends of UK company shares.
• When you retire you can normally withdraw up to 25 percent of the value of your plan as a tax free lump sum, although remember that your retirement income will be liable to income tax.
• If you die before you retire, no inheritance tax will normally be payable on the value of your plan, although any dependants' income will be liable to income tax.

The value of the tax benefits of your plan depend on your individual circumstances. Your circumstances and tax rules may change in the future.

Many people would rather not think about how much money they'll need at retirement. But remember that every day you put it off makes a difference to your income when you eventually do retire. And by then, it may be too late to do anything about it.

View our Cost of Delay Calculator

The first step you need to take is to work out how much income you think you'll need when you retire. Although you may have paid off your mortgage, and don't have work related expenses, you'll have a lot more leisure time to fill and you may need to replace some of the benefits your employer provided, such as life assurance or private health cover.

Once you have an idea of how much you'll need, compare this to how much you're likely to get from your existing pension plans. You should also take into consideration the amount you'll receive from a State Pension visit the Pension Service website for more information on this and any other forms of income you may have.

If there is a gap between the amount of income you think you'll need and the amount you're likely to get, you may want to save more now. The more you can pay into your pension plan, the more income you're likely to have when you retire.

You should consider putting aside as much as you can reasonably afford - the long term rewards can be well worth it.

Our Quick Pension Calculator can help you work out how much you need to save each month.

You should review your pension plan regularly to make sure it remains on track to support you as you would like in later life. Can you be sure your pension plan is on course to provide the retirement you desire? You need to keep an eye on it and give it a boost if necessary. That could mean topping up the amount you're paying in, or simply checking that you're happy with your choice of investment funds.

Should I top up my pension plan?

By topping up your pension plan you can potentially build up a larger pension fund for when you eventually retire and therefore may be able to secure a higher level of income. The more you can pay into your pension plan, the more you're likely to have in retirement.

Topping up your pension plan may make sense for you. The earlier you start the more time you give your pension plan to grow.

If you're not sure whether you should top up your pension plan you should speak to a financial adviser. There may be a cost associated with receiving advice.

Where is my pension plan invested?

Your investment needs and views can change over time. It's important to regularly review your investment fund choice to see if it still matches your needs and views.

There are different types of investment funds to suit the needs of different investors - you can choose where your payments are invested and switch funds, usually whenever you want. Each fund carries different types and levels of risk.

For more information on particular funds, you can search the fund section of our website.

Remember that if you're unsure about where your payments should be invested, you should speak to your financial adviser. There may be a cost associated with receiving advice. The value of your plan can go down as well as up. You may not get back as much as you invest.

Topping up your pension plan is easy. You can increase the level of your existing regular payments,add an automatic increase option or add a single lump sum payment.

Firstly, read your plan literature, and then just call us

• Stakeholder and Personal pensions - 0845 716 6777* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday)
• Retirement Account - 0845 716 6733* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday).

We'll answer any queries you may have if you don't have your plan literature to hand.

You might have contributed to a number of pension plans over your working life - different employers' schemes and/or personal pension plans that you've stopped contributing to.

In some circumstances it can be a good idea to consolidate all of your pension plans by transferring them to one pension plan with one provider – such as Scottish Widows. For example, you might benefit from higher bonuses or from lower charges for larger pension funds. It also means that your pension plans will be easier to keep track of with only one annual statement and one set of investment decisions to review.

However, transferring isn't right for everyone. You could be giving up valuable benefits under your existing pension plans and there may be charges for transferring. Speak to your financial adviser before you decide.

If your previous employer contributed to your pension plan

If your previous employer contributed to your pension plan, you may want to make up for this drop in contributions to make sure that your pension plan does not suffer as a result. Your options include:

• Asking your new employer if they would be prepared to contribute.
• Make up the difference yourself if you can afford to. The long term rewards can be well worth it.

If your new employer has a company pension scheme

Work linked pensions can be a good option as most employers will also make a contribution on your behalf.

You do not have to stop contributing to your own pension plan if you join your employer's scheme – if you can afford to do so you can contribute to more than one pension plan subject to the maximum allowed (£50,000) 2011/12.

You should consider:

• How much your employer is prepared to contribute to the work linked pension
• Whether your employer provides tax efficient options such as salary sacrifice, please speak to your employer for more information
• Whether you can pay additional voluntary contributions, please speak to your employer for more information
• Whether your employer's scheme offers the same (or better) levels of charges, investment options and retirement options as your personal pension plan.

Your financial adviser will be able to help you choose the route which best suits your retirement goals.

You need to think carefully before transferring as this isn't right for everyone. You could be giving up valuable benefits under your existing pension plan and we may make a charge for transferring. You should consider speaking to your financial adviser before you decide to make any changes.

Please call us to discuss your options and we'll answer any queries you may have. If you want advice please speak to your financial adviser.;

• Stakeholder and Personal pensions - 0845 761 6160* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday)
• Retirement Account - 0845 716 6733* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday).

Yes, but only when you start taking your pension. Your policy can provide pension income and by law no benefits can be taken before the minimum retirement age of 55 unless you are unable to work because of severe ill health.

You can currently take up to 25% of your pension fund as a tax-free lump sum when you start taking your pension income.

You must then use the remaining value to provide your taxable pension, normally by buying an annuity that pays income either monthly or yearly.

There may be a charge if contributions to your policy reduce, stop or if you start taking your pension early. Remember, if you take your benefits early, your policy will have had less time to grow, and the cost of a pension will be higher because you've retired at a younger age. The earlier you take your benefits, the lower the monthly or yearly pension you're likely to receive.

If you retire before your selected pension date you will lose any guaranteed annuity rate that currently applies to your plan. So, before taking your benefits early you should check your policy provision to see if a guaranteed annuity rate applies to your plan and if it does, you could consider if it would be better to wait until your selected pension date.

If you take your pension benefits or transfer the value of your pension either before or after your policy's normal retirement date, a Market Value Reductions may also apply if you are invested in a With-Profits fund.

You can get tax relief on pension contributions up to 100% of your UK relevant earnings in any tax year. If you're not earning, you can pay up to £3,600 including tax relief. If you pay in more than these amounts the Government will claim back the tax relief on the excess and we'll refund your contribution.

There's also a limit on the amount that can be paid into your pension policy each year. This is called the Annual Allowance and is set by the Government. If the payments made to your pension policy exceed the Annual Allowance you'll be liable to pay a tax charge on the excess. Tax rules can change.

Yes, you have access to a wide range of investments to choose from, allowing you to change your investment strategy to suit your retirement planning needs. Most plans allow investment fund switches each year at no extra charge.

Firstly, read your plan literature, and then just call us

• Stakeholder and Personal pensions - 0845 716 6777* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday)
• Retirement Account - 0845 716 6733* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday).

We'll answer any queries you may have if you don't have your plan literature to hand.

We understand that your circumstances may change from time to time, and you may need to review the amount you are paying into your pension plan. A number of options may be available including taking a premium holiday or reducing your level of premiums for a few months.

You should consider speaking to your financial adviser before you decide to make any changes.

Please call us on

• Stakeholder and Personal pensions - 0845 761 6160* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday)
• Retirement Account - 0845 716 6733* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday).

Remember, if you do stop saving, you'll lose out on money from the tax man (and possibly from your employer if they are contributing to your plan). Stopping saving may well have a real impact on the amount of money you will have to live on in retirement. And there may be a charge if you stop or reduce contributions to your policy.

Restarting your payments is easy. Firstly, read your plan literature, and then call us on

• Stakeholder and Personal pensions - 0845 761 6160* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday)
• Retirement Account - 0845 716 6733* (Open 8am to 6pm weekdays, 9am to 12.30pm Saturday).

We'll answer any queries you may have if you don't have your plan literature to hand.

You should consider speaking to your financial adviser before you decide to make any changes.

If you're about to retire and take your benefits, you may want to find out about the retirement income options available.

Scottish Widows offers a choice of:

• buying an annuity to give you a guaranteed regular retirement income or
• buying a plan where you can take retirement income directly from your pension fund.

Annuities

When you retire, you'll need to convert your pension plan into a regular income. If guaranteed income is an important part of your retirement planning, you should consider an annuity, which will provide you with a regular income, guaranteed for life.

A Scottish Widows Conventional Annuity lets you take a tax-free cash sum from your pension fund, then convert what's left into a taxable income. It can also:

• provide an income after your death for your wife, husband, civil partner or other dependants
• be guaranteed to be paid for up to 5 years, even if you die before then
• provide a level of index-linking so that your income payments increase each year

However, using either of the first two options will mean that the annual income you get will be lower throughout the lifetime of your annuity, and using the last option will mean that the annual income you get to start with will be lower.

Why you need to discuss your retirement options with an adviser

Selecting the right retirement income product for you is probably one of the most important financial decisions you'll make in your lifetime. Your financial adviser will be able to help you choose the route which best suits your retirement goals.