FAQs

If you change jobs or become self-employed - or leave paid employment - you will usually be able to take your plan with you. In most cases, you and your new employer will be able to continue making payments to your plan.

You can increase the amount you pay at any time. You can even stop making payments if your circumstances change, although you should always consider such a decision carefully and consult a financial adviser if you need more information, as it will mean less money is available when you take your pension.

Like most private pensions, our Stakeholder Pension has an annual fund charge to cover the administration and management of the plan. This is currently 1%.

Your payments into a Stakeholder pension usually qualify for full income tax relief at the highest rate you pay. Any payments that exceed 100% of your relevant UK earnings (or £3600 gross if higher) in any year won't 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. If you're not working, you can still get tax relief on your payments; though you can only pay in up to £2880 net (£3600 after tax relief is added) each year. Tax treatment depends on your individual circumstances and may be subject to change in the future. Here's how it works:

If you are a basic rate tax payer

If, for example, you make a net payment of £80 a month to your Stakeholder Pension plan. HM Revenue and Customs will currently 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 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

Tax rules can change.

What you get will depend on what you put in, how long you keep making payments, how investments perform, the tax treatment of your plan and annuity rates when you choose to take your benefits.

You can normally start taking all or part of your pension between ages 55 and 75, unless you retire prior to 6 April 2010, in which case the minimum age is 50. Once you've decided how much income you think you'll need and when you want to take it, you can work out how much you might need to save to reach your retirement goal.

Use our simple Pension calculator to get an idea of how much you might need to save.

No tax relief is available on any payments you make that exceed 100% of your net 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:65k) 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.

We offer you a range of investment funds to choose from.

If you do not choose an investment fund(s), all payments will be invested in our default investment option. If this option applies to your plan, all payments will initially be invested in our Consensus Fund. We will gradually switch your investment over the five years before your chosen retirement date. We do this with the aim that your plan will be invested approximately 75% in our Pension Protector Fund and approximately 25% in our Cash Fund at your selected pension date. Any payments into your plan from 5 years before your chosen retirement date will also buy units in these funds. The value of an investment is not guaranteed and can go up and down depending on investment performance (and currency exchange rates where the fund is invested).

Before making a decision, you may want to Contact us, or consult a Financial Adviser.

You can normally start taking all or part of your pension between ages 55 and 75, unless you retire prior to 6 April 2010, in which case the minimum age is 50.

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 may 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) 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 also 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.

Tax rules can change.

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).

For stakeholder plans taken out after 1 January 2007, we offer an additional benefit called 'Accidental Death Benefit'. In the event of an accidental death in the first 5 years, which meets the terms of the policy we'll pay out the greater of the value of your plan or the Accidental Death Benefit.

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 (for the 2008/2009 tax year £1.65 million) may be subject to a Lifetime Allowance 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 get back when you take your pension.

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

The 20% discount for online Stakeholder Pension Plan applications is a permanent discount that applies for the term of the contract. Customers who agree to deal with us exclusively via the Internet will receive the reduction. Because our underlying Stakeholder Pension funds have an annual fund charge of 1%, Scottish Widows add units each month to reflect the difference.