Pensions FAQs

Frequently asked questions

One of the main benefits of a pension is the tax relief that you receive. But it is worth noting that there are annual limits on how much tax relief you get on pension payments.

Your pension investments also generally grow free of tax (for example no Capital Gains Tax to pay on investment growth).

This means a pension is a tax-efficient way to save for your future.

Tax relief is available at the rates shown in the table below and is given on a sliding scale, this is known as your marginal rate. It operates in the same way in Scotland however income tax rates are slightly different to the rest of the UK, therefore rates for pension tax relief are also different and these are shown in the table below.

Tax Rate UK Tax Rate Scottish Tax Rate
Starter 19%
Basic 20% 20%
Intermediate 21%
Higher 40% 41%
Additional 45% 46%

What is tax relief?

Tax relief is just one of the benefits of a pension. In this video, we explain how tax relief works and what it could mean for you.

There are two main ways you can receive tax relief on your pension payments, they are:

Net Pay

This applies to some workplace pensions (known as Occupational Schemes). In a Net Pay scheme your employer deducts your pension payments from your gross salary and you only have to pay tax on what is left. This ensures you receive the right level of tax relief without having to claim anything back from HMRC.

The annual limit for tax relief you can receive in a Net Pay scheme is 100% of your earnings.

Relief at source

This applies to stakeholder pensions, personal pensions and some workplace pensions, where 20% tax relief is automatically added to your payments. If you pay more than 20% tax, you can claim the additional tax relief through your tax return or direct from the HMRC.

The annual limit for tax relief you can receive in a Relief at Source scheme is the higher of £3,600 and 100% of your earnings. This means you can get tax relief on payments up to £3,600 gross (£2,880 before tax relief is added) even if you have no earnings. A similar treatment applies if you are a Scottish taxpayer, payments receive 20% tax relief even if you only pay tax at 19%.

We understand that tax can be complicated. You can read more on the HMRC website. If you need any more information on pension tax relief, you can call us.

Annual Allowance

There is an Annual Allowance of £40,000 in 2018/2019 which impacts how much you and anyone paying on your behalf (for example your employer) can pay into your pension without a tax charge. This charge effectively removes the benefit of tax relief. There are circumstances where your annual allowance may be lower than £40,000. These circumstances are:

Money Purchase Annual Allowance (MPAA)

If you withdraw money flexibly from a pension (either via flexible retirement income or take a certain type of lump sum) you will be subject to a reduced annual allowance, which is £4,000 for the tax year 2018/19 (called the Money Purchase Annual Allowance because it only applies to contributions to “defined contribution” pensions). This means you will incur a tax charge if you and/or your employer pay in more than £4,000 to your pension. You will have been told by your pension provider if the MPAA applies to you and to notify your other pension providers within 91 days or you could be subject to a fine.

Tapered Annual Allowance

If your total income is greater than £150,000 your annual allowance could be reduced. However, this only applies if your taxable income without the addition of employer payments is more than £110,000.

You can find more information at

Lifetime Allowance

There is a standard Lifetime Allowance of £1,030,000 in 2018/19, which impacts how much you can take across all your pension savings without a tax charge. Tax charges over this will depend on how you choose to take these benefits and whether you have previously applied for protection.

Every time you take benefits from a UK pension (not including the state pension) some of your Lifetime Allowance is used up and, once it is all used up, any further benefits will be subject to tax charges.

You can find more information at The tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future. If you think your total pension savings are approaching the Lifetime Allowance you should seek professional advice on the potential tax consequences.

There are a number of factors that will affect how much risk you are willing to take, including how long you plan to invest, your age and health, your income level, your investment goals, the source of your funds, and how much of your total assets the investment represents.

Understanding Risk

Over the longer term, investments could offer better returns than cash savings, but in trying to achieve higher returns this does mean more risk. When deciding how to invest your money, it's really important that you understand the risk levels involved in different investments, and work out how much risk you're comfortable with. It's also important to consider how long you want to hold your investment.

When you’re investing, you'll need to think about both your attitude to risk and your ability to absorb losses. Some people would be very unsettled by the prospect of the value of their investments falling, while others would be happy to take the risk of ups and downs in the stock market.

If you want to more information, give us a call.

One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes take a look at this guide.

Why does my pension rise or fall in value?

Pensions can rise and fall in value and it’s important you understand why. Find out in our Pension Basics in 30 seconds film.

Lifestyling involves investing in riskier assets when you have a long period before you retire. As you get closer to your retirement date (normally 5 to 15 years before), the investment switches from these riskier assets into less risky ones. The reason for this is that your investment isn’t as likely to be affected if markets were to fall sharply. This approach could restrict the potential for growth as you get nearer to retirement.

For personal pensions arranged by employers and individual personal pensions, we have the Pension Investment Approaches (PIA) and Governed Investment Strategies (GIS) Lifestyling options. You can find more information about these in the Pension Investment Approaches guide and Governed Investment Strategies guide.

Our Premier PIA and Premier GIS lifestyling options (PPIA and PGIS) work in the same way as our original versions, aiming to manage risk and reward for you as you move through your working life and on towards retirement. These cost more than the original versions, but aim to offer the potential for better returns for similar levels of risk. There is however no guarantee of this. You can find more information about our Premier lifestyling options in this guide.

We have three risk categories to choose from – Adventurous, Balanced and Cautious, reducing exposure as you move towards retirement.

Lifestyling allows you to target annuity, encashment or flexible access (drawdown). Each outcome is designed to prepare your pension investment as you approach retirement.

If you’re currently invested in a Lifestyle option and you’d like to check that it’s still right for you, please call us. If you have changed your selected retirement age, it’s important to check that your investments are still on track.

We have fund prices and fund factsheets that shows the fund performance for most of our pension funds.

The fund factsheets help you compare funds.

We have created a step by step guide that should help you read and understand the fund factsheets:

We know funds and investments can be difficult to understand. Please call us if you need us to help you find the correct factsheet.

Fund name and approach

  • The Investment approach is usually found in the top left hand corner (Scottish Widows only). If you can’t find this, please call us
  • The name of the fund is shown next, which also shows the share class and if it’s an accumulation or income fund
  • You will also find the date the factsheet was last updated.

Asset Allocation

  • This tells you what the fund invests in and the level of diversification.

Fund Aim

  • Whether the fund is focused on income, growth or a combination of both
  • What sorts of asset types the fund invests in (e.g. automotive, pharmaceutical)
  • What countries and regions the fund invests in (e.g. China, Asia).

Basic Fund Information

  • The fund information shows you when the fund launched and who the fund manager is
  • The fund manager is a key piece of information and can easily be researched through search engines to understand their track record compared to other fund managers
  • This also shows you how long the fund has been managed by that person
  • This can be useful when reviewing fund performance
  • The ISIN number lets you search for the fund online; on external sites you can find more information on the fund and compare a number of funds side by side. Click here for Morningstar website that allows you to do that.

Top ten holdings

  • The top 10 companies or funds the fund is invested and what percentage is held in each company/fund
  • The companies a fund manager invests in will depend on what the aims of the fund are.

Fund Rating Information

  • Financial Express (FE) – Crown Fund Ratings range from one to five
  • More crowns, the better a fund has performed in terms of stock picking, consistency and risk control
  • Gives an indication of how well the fund has performed compared with similar funds/peer group. The FE crown rating is regularly reviewed and may change.


  • There are two pieces of performance information: Discrete and Cumulative
  • Discrete shows you a snapshot of the performance in each calendar year whereas cumulative adds up performance over time to show overall growth or loss over one month, 3 months, 1 year, 3 years and 5 year periods
  • Discrete performance gives you an insight into the consistency of performance which may be hidden in the cumulative performance story
  • It is very important not to look at performance in isolation as it doesn’t indicate what could happen in the future
  • The value of investments can go down as well as up.

Quarterly Fund Manager Review

  • This is like a “school report” for the fund and reflects on what has happened over the last quarter but isn’t an indicator of future performance
  • This gives you an overview of what has happened in the markets and may explain downturns in performance
  • You can get a sense from this section on if there are fund specific performance issues or if it’s due to the wider market conditions.

Your annual statement will tell you what funds you are currently invested in.

Before you review your investments or go ahead and switch funds make sure you have read:

If you want to switch funds, please call us.

It’s currently free to move, or switch between funds.

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, we can help you find one in your area.

Should I pay more into my pension?

If you only save the minimum into your pension it could mean less money to enjoy in retirement. Increasing your payments by only a small amount could make a big difference.

Saving into a pension doesn’t necessarily mean you need to fork out more money each month. Perhaps your mortgage payments have gone down or you’ve saved money on your utility bills. This could then be used to save more towards your pension without trying to make cuts elsewhere.

It’s good practice to review your monthly expenditure and shop around for deals. You may be able to save some money by switching energy company or insurance provider. £20 per month adds up to an extra £240 per year. Small payments like that over a number of years can make a big difference to your pension pot.

If you want to find out how much you are currently saving, re-start your pension payments or change the amount you pay in, please call us. If you’re paying into your company pension, you can view your current payments by logging into our online services or speak to your employer to make a change to your payments.

Can I combine my pension pots together?

Combining your pension pots can make managing your pension much easier, but you may lose access to certain benefits if you do so.

Combining pension pots may make it easier for you to plan for your retirement. One pension saves you the hassle and paperwork of managing many different plans. You have one central contact and one place to see how your retirement planning is going. It could also save you money on charges.

There are a number of things to consider before you transfer and you need to be careful that you don’t lose any guarantees or features and you should also compare the charges and funds. Your existing provider may apply an exit charge for transferring out or, if you are in with-profits they may apply a ‘market value reduction’ for leaving early.

If you want to get more information on combining your pensions in to your Scottish Widows plan, you can find it here or by calling us. This service is free, but we can’t offer you financial advice or recommendations.

You also have the option to transfer your Scottish Widows pension to another provider.

If you want to transfer this pension pot to a different pension plan, this could be with us or another provider. There are a number of things to consider before you transfer and you need to be careful that you don’t lose any guarantees or features and you should also compare the charges and funds. We won’t charge for transferring your plan to another provider but, if you are in with-profits a ‘market value reduction’ could apply. You may want to contact a financial adviser if you are considering transferring, they may charge you for this.

It’s good practice to review your pension every year when you receive your annual statement. You will be able to see what your current value is and have a think about whether it’s going to be enough to fund your retirement. Spending a few hours doing this now could leave you better off as you move towards retiring.

There are a few factors that can affect your pot size, such as how much you pay in each year, what funds you are invested in and the charges.

You can call us to get information about your pension. You may want:

  • A valuation
  • An illustration (which is a projection showing what your fund could be when you retire)
  • A retirement quote
  • To find out what fund you are invested in and some information around the type of fund it is
  • To find out what other fund options are available to you
  • To get more help around funds

Choosing the right investment fund is an important decision you need to make and these choices can influence the performance of your product and ultimately how much you have.

Your annual statement will tell you where you are currently invested.

Before you review your investments or do a fund switch, you should look at the following information:

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, we can help you find one in your area.

You can normally access your pension from age 55 (or earlier if you are in ill health or have a ‘protected pension age’). The UK pension rules changed in 2015, you may have heard this being referred to as Pension Freedoms. This allowed more flexibility in how you can take money from your pension. Some pensions don’t allow all the flexible options and you may have to transfer to another pension to access more options.

The Scottish Widows Retirement Account pension product is designed to support you throughout saving for your retirement, taking your pension savings flexibly, or both. It’s a pension that allows you to phase in your retirement and access your money when it suits you.

When can I access the money in my pension pot?

When planning for your future, it’s important to know when you can access the money in your pension pot.

It’s important to let us know if anything changes, like your address, or your name. This makes sure our records are always up to date so you don’t miss out on receiving any important information.

To change your address call us, or if you’re registered for our online services you can update your address whenever it suits you.

If you’ve changed your name call us and we can let you know which official documents you’ll need to send to us and we will arrange for a form to be sent out to you.

What happens to the money left in my pension when I die?

It’s important to know what happens to the money you’ve saved after you’ve gone. This video explains the tax implications and how it’s paid to beneficiaries.

Have you told us recently who you want to leave your money to if you die before retirement? It’s really important to keep your Beneficiary Nominations up to date, as life changes and your wishes may not be reflected in the form you may have completed years ago. It’s particularly important following major life events such as the birth of children, marriage or divorce. Please call us so we can send you out a form and update your beneficiary details.

This is known as a ‘Nomination Form’. We will use it as a guide to decide where to pay the money to but we are not bound by it and we may pay it to another beneficiary, depending on your personal circumstances when you die and how up to date the form is.

If your pension is provided by your employer, you can download a Nomination Form by logging in to Workplace Pensions for Employees.

Do I need a financial adviser?

Financial Advisers can really help you make the most of your money and a plan for your future. We also look at some of the other options available.

How Scottish Widows Advisers can help you

We have our own team of experienced financial advisers who can work directly with you. They can only make recommendations from Scottish Widows, but they are the experts in choosing the best options for you from us. They will first find out about you. Then they will have a careful look at your policies and plans and review your choices. They can give you a tailored recommendation for what you should do next.

For advice from a Scottish Widows Financial Adviser, call 0345 767 8910. One of our consultants will assess your requirements and set up an appointment with one of our advisers.

Key facts about Scottish Widows Advisers and Charges PDF

If you are not looking for advice, but need further help from us, please call 0345 755 6557. Our opening hours are Monday to Friday 8am to 6pm and Saturdays 9am to 12.30pm.

Further help from Scottish Widows

If you are not looking for advice, but need further help, please call us.

Seek Financial Advice

A financial adviser can offer you services and products from other providers. Find a Financial Adviser in your area.

Pension Wise

Pension Wise is a Government service that offers people over 50, who are approaching retirement, free, impartial guidance about the choices available. You can receive Pension Wise guidance online, over the phone or face to face.

Pension Wise provides guidance to explain what options you have available to you and to help you think about how to make the most out of your pension savings, as well as tips on how to get the best deal, including how to shop around.

Money Advice Service

The Money Advice Service is independent and set up by the government to help people make the most of their money by giving free, impartial guidance. As well as information about pensions and retirement, they offer a wide range of other money topics.