FAQs

If you change jobs, become self-employed or leave paid employment then you simply take your plan with you. In most cases, you (and your new employer if you have one) will be able to continue making payments to your plan. Please note that if you are not earning, there will be a limit to how much you can pay.

You can increase the amount you pay at any time. You can even stop making payments if your circumstances change, although you should always discuss this decision with your financial adviser as it is likely to mean less money is available when you take your pension. You can request an illustration from us showing the effect of reducing or stopping your payments.

Like most private pensions, our Personal Pension has an annual fund charge to cover the administration and management of the plan. Depending on how you choose to invest your money, there's a wide range of annual charges. Details of these can be found in the product literature. There are no separate initial set-up charges.

Your payments into a Personal Pension usually qualify for full income tax relief at the highest rate you pay. Any payments that exceed your taxable earnings (or £3,600 if higher) will not qualify for tax relief. Similarly payments by your employer, or any funds that you transfer in from another pension scheme, will not qualify for tax relief. Here's how it currently works if you choose to pay £100 a month (gross) payment:

If you are a basic rate tax payer

If, for example, you make a net payment of £80 a month to your Personal Pension plan. HM Revenue and Customs will top it up with an additional payment of £20. You now have £100 a month going into your pension plan.

What you pay: £80
Add automatic tax relief: £20

Total going in to your pension: £100

If you are a higher rate tax payer

If, for example, you pay the same £80 you'll get the same automatic £20 top-up. You then claim the difference between basic and higher rate tax relief in your self-assessment tax return. This is currently £20, so your £100 gross payment effectively costs you only £60 under current tax rules.

What you pay: £80
Add automatic tax relief + £20
Additional tax relief you reclaim: £20
Net cost to you: £60

Total going in to your pension: £100

The above information is based on current tax rules which may change in the future.

What you get largely will depend on what you put in and how long you keep making payments. You can choose your retirement age - anytime after your 50th birthday (55 from 2010) - and then work out how much you would need to save to reach your retirement goal.

Use our simple Pension calculator to plan your retirement.

There is no absolute upper limit on the payments that can be made to your pension plan each year.

However, no tax relief is available on any payments you make that exceed your relevant UK earnings, or £3,600 (gross) if higher. Scottish Widows cannot accept any payments from you that do not qualify for tax relief.

In addition, an Annual Allowance applies to the amount of payments made to your pension plan each year. If the payments made to your pension plan in any year exceed the Annual Allowance, you will be liable to pay a tax charge on the excess. The Annual Allowance is set each year by the Government. For the 2008/2009 tax year, it is set at £235,000. The Annual Allowance will not apply to payments made to a pension plan, in the year in which all benefits are taken.

A Lifetime Allowance, also set by the Government, applies to the total value of pension benefits you can receive from all your pension plans. A tax charge must normally be deducted from any benefits that exceed the Lifetime Allowance, before they can be paid. The Lifetime Allowance for 2008/2009 tax year is set at £1.65 million. It will increase to £1.8 million by 2010/2011, and will be reviewed every five years.

See our Key features (PDF:107k) for more information on tax relief, the Annual Allowance and the Lifetime Allowance.

The above information is based on current tax rules which may change in the future.

You can decide to take your Personal Pension benefits any time between age 50 and 75, even if you're still working. From 6 April 2010, the Government has increased the minimum age at which you can normally start taking your pension from age 50 to 55.

At your selected pension date, you have a number of options to choose from. You don't need to make any decisions now, but when you do, you will probably want to discuss your options with a financial adviser.

• You can use your fund to provide an immediate pension, giving you a regular taxable income for life.
• You can normally take up to 25% of your fund as a tax-free cash lump sum, using the balance of your fund to provide a (reduced) regular taxable pension for life.
• You can give up part of your pension, to provide a taxable pension for your husband, wife, registered civil partner or other dependant after you die. You can choose whether you want your pension to remain level throughout your life or to increase automatically each year.
• You can delay buying your pension, but still take a taxable income by moving to Income Drawdown.

The full value of your pension plan will normally be used to provide a cash lump sum for your dependants, unless part of it has to be used to buy a pension for your husband, wife or registered civil partner (this could happen if you have a separate fund because you've contracted out of the State Second Pension).

Normally, no Inheritance Tax is payable on the value of your plan. However, if your plan is used to provide a lump sum death benefit, any amount in excess of the Lifetime Allowance (currently £1.65 million) may be subject to a tax charge. There's normally no charge if the excess is used to provide a pension for your husband, wife, registered civil partner or dependants (note that such pensions are treated as earned income and could be taxed in payment).

When your plan is set up, you will receive your policy documents followed by a personalised 'Illustration' based on your chosen payments, fund choices and selected pension date. This will show you what you might expect when you take your pension if certain growth rates are achieved.

Every year, we'll send you an updated pension benefits statement which shows the value of your plan and what you might get back, provided certain assumptions are met. You can also keep track of your pension online, as well as checking daily fund prices.