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Personal Pension

Frequently asked questions

It's important to understand all the facts about our Personal Pension before you take out your plan. So, we've put together some easy-to-follow frequently asked questions and answers:

Are you eligible for an Aviva Personal Pension?

To be eligible for an Aviva Personal Pension plan you need to be under 75 years of age, eligible for tax relief on the payments you make and resident in the UK. You're classed as 'resident' if you live in the UK all or most of the time – if you're not sure, you can ask your local tax office. You may also be eligible if either you or your spouse/civil partner works overseas for the UK Government.

If you do take or have taken out an Aviva Personal Pension, you need to tell us if:
  • You stop being resident in the UK
  • You stop having earnings subject to UK Income Tax
  • You or your spouse/civil partner stop working for the UK Government overseas
  • You move abroad or start working abroad

To amend your personal details:

Call us on 0800 068 6800

As all of these may affect what you can pay.

You need to take advice from your financial adviser before taking out an Aviva Personal Pension plan to make sure it's right for you. If your employer has a company pension scheme that you are able to join, you should always consider your employer's scheme first and discuss this with your financial adviser.

What would you get from the State Pension?

If you're single, you'd receive just £113.10 a week from the Basic State Pension in the current tax year (2014/2015), or as a married couple or civil partners you'd get a total of £180.90 per week.

As a married couple or civil partners, if both have full pension entitlement from NI contributions they can each claim the single person's rate (for a total of £226.20).

The actual amount of Basic State Pension, State Earnings-Related Pension Scheme (SERPS) and Second State Pension (S2P) you receive will depend on the National Insurance contributions you've paid during your working life. Each year that National Insurance contributions are paid is called a qualifying year. For 2014/2015 to be a qualifying year you need to earn at least £5772 if you are an employee, or £5885 if you are self-employed, and have paid (or been credited with) National Insurance contributions based on these earnings. Men born after 5 April 1945 and women born after 5 April 1950 need 30 qualifying years for a full Basic State Pension, with a single qualifying year required to get any State Pension. Men born before 6 April 1945 needed 44 qualifying years for a full Basic State Pension, and women born before 6 April 1950 needed 39 years; to get any State Pension, an individual needed 25 per cent of the qualifying years required for a full pension. Individuals with less than a full record of qualifying years, may elect to pay voluntary National Insurance contributions, in order to boost their record for pension purposes. People in certain circumstances, such as caring for a severely disabled person for more than 20 hours a week or claiming unemployment or sickness benefits, gain National Insurance credits.

The amount of the Basic State Pension that you actually receive is calculated by multiplying the full rate by the number of your qualifying years and dividing by the number of years needed for the full rate. However, there's likely to be a large gap between your income before retirement and the State Pension you receive when you retire. The good news is that starting a Personal Pension plan with Aviva will not affect your entitlement to the Basic State Pension.

You may also be entitled to other benefits.

Is an Aviva Personal Pension the same as a stakeholder pension?

They are not the same, as an Aviva Personal Pension doesn't meet the criteria set by the Government relating to minimum contributions, charges and terms and conditions that stakeholder pensions must comply with.

Your financial adviser will be able to advise you on which pension plan is right for you.

What are the charges?

If you and your adviser decide that this plan is right for you, we'll provide you with detailed information on the charges in your personal illustration.

Product Charges

We apply an Annual Fund Charge (AFC) for managing your plan.

  • Additional charges apply to some funds. These may include an additional yearly charge and/or a fund manager expense charge. Charges are fund specific. You can find full details in the pension fund guide.

For new plans, we currently discount the Annual Fund Charge if your pension fund grows above £20,000. The discount is 0.25% if the value of your pension fund is between £20,000 and £49,999. And if it grows to £50,000 or more, the discount is 0.3%.

Adviser Charges

The cost of advice can be paid for through the plan, using our Adviser Charge options - your adviser will give you details about the cost of advice.

How much can you invest?

You can start an Aviva Personal Pension plan with as little as £200 per month or you can make a one-off payment starting from £10,000. If you make further payments you can choose to make one-off payments of £1,000 if you pay in £200 or more a month. Or you can make a one-off payment of £10,000 or more and choose to pay a minimum regular payment from £20 per month. All amounts shown are inclusive of tax relief and regular or one-off payments can also be made by your employer, if you have one.

HM Revenue & Customs sets the maximum amount that you can pay into your pension plans and still receive tax relief. We only accept payments that qualify for tax relief. The tax relief limits are 100% of your annual earnings or £3,600 (inclusive of tax relief) if greater.

There's an overall payment limit each year which is called the annual allowance. If the total amount of payments (including employer payments) to all your pension plans exceeds the annual allowance the excess will normally be subject to a tax charge. For the 2014/2015 tax year the annual allowance is £40,000.

If you or your employer make payments above the Annual Allowance, you may be subject to a tax charge. Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

You can make regular monthly or yearly payments into your Aviva Personal Pension. This is normally done by direct debit from your bank or building society account. You can also make one-off payments at any time, which could include money you've moved from another pension scheme.

If you want to stop making payments for a while you can take a payment break for up to 12 months after which payments will continue as before. If you need to stop making payments altogether (for example, if you have left work to raise a family) you can then choose to restart them at a later date. Stopping payments will affect how the pension fund grows and charges will still be deducted. You can also choose to increase your payments every year in line with the Average Weekly Earnings Index, the minimum increase is 3% and the maximum is 15% of the amount you pay regularly by direct debit.

What are the tax rules?

On 6 April 2006, HM Revenue & Customs (HMRC) introduced new allowances governing the amount of money you can build up in all your pension plans whilst still benefiting from Income Tax relief:

  • Tax relief - There's no limit on the amount that you can pay into your personal pension and any other pension plans you have, but you won't get tax relief on payments over a certain amount. HMRC allows tax relief on your personal payments to your pension plans of up to £2,880 a year (which would become £3,600 with tax relief), or 100% of your UK taxable earnings if greater.
  • Annual Allowance - The Annual Allowance had an overall limit, which was £50,000 in the tax year 2013/14. The Annual Allowance has fallen to £40,000 for the tax year 2014/2015. If total payments from you and your employer to all your pension plans are above the Annual Allowance they may be subject to a tax charge.
  • Lifetime Allowance - The Lifetime Allowance was £1,500,000 for the taxyear 2013/14 tax year. The Lifetime Allowance has fallen to £1,250,000 for the 2014/2015 tax year. As well as the amount you're currently building up in pension plans, the Lifetime Allowance also takes into account the value of any pensions already being paid to you and any tax-free lump sums you've received. If you already have pension funds that exceed the Lifetime Allowance or you think may exceed it in future, you should talk to a financial adviser before taking out a personal pension.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

How do you get tax relief?

You make your payments, less an amount equal to the basic rate of Income Tax. Aviva then claims this back from HM Revenue & Customs (HMRC) on your behalf and adds it to your plan, together with the amount you have paid. This is often referred to as making payments net of basic rate tax. For example, if basic rate tax is 20% and you pay £160 into your plan, HMRC will add £40 to this, so the total invested is £200. This is known as basic rate tax relief.

If you pay Income Tax at a rate higher than the basic rate, the payments made into your plan will only be increased by basic rate tax relief, but you will be able to claim higher rate tax relief on your annual self-assessment tax return.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

What choices will you have when you take your retirement benefits?

You can not normally take your benefits until you are at least aged 55 and under this plan, Aviva requires you to take benefits by age 75.

When you retire, you can normally have up to a quarter (25%) of your pension fund paid to you as a tax-free lump sum. You can then use the rest (or all) of your pension fund to:

  • Invest in income drawdown – Income Drawdown is a way of taking an income from the money you've built up in your pension fund. This will pay you a regular income from your personal pension fund, whilst leaving the remainder invested for further potential growth. Find out more about income drawdown.
  • Invest in a Fixed Term Retirement Plan from Aviva – It's a retirement income plan that lets you start using your pension fund for a fixed term of your choosing between five and ten years. This is suitable if you have a pension fund of at least £30,000 after any tax free cash has been taken and any adviser charge has been paid. There is no cash-in value at anytime and you can't make changes to the plan once it starts, even if your personal circumstances change. Find out more about the Fixed Term Retirement Plan.
  • Buy an annuity – This will pay you an income for the rest of your life. Find out more about annuities.

Tax will be deducted from your retirement income before it's paid to you. If you don't pay Income Tax, you can arrange for your retirement income to be paid without tax being deducted.

You don't have to take your retirement income from Aviva – you can choose to move your pension fund to another provider when you retire; this is known as the open market option. When you approach your retirement date, we'll give you details of your choices and tell you how much of your Lifetime Allowance you've used. If you take benefits above the Lifetime Allowance there may be a tax charge - we'll tell you more about this if it applies to you.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

What if you have an existing pension plan?

If you've had more than one employer during your working life, then you may have built up benefits in several company pension schemes. You may also have taken out a private pension of your own. If so, you may carry on paying into your private pension as well as taking out a personal pension plan. In most cases, you can also move the money that you've built up in other pension schemes into an Aviva Personal Pension plan.

Bear in mind that not all pension schemes work in the same way, so moving any existing pension funds into your new plan may not always be the best thing for your own personal circumstances. We recommend that you talk to a financial adviser before deciding to move an existing pension plan.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

What happens if you die before you retire?

If you die before you start receiving your retirement income, we'll normally pay the full value of your pension fund as a lump sum. The value of the pension fund may be worth less than has been paid in. You can specify the person or people you would like to receive all or part of a lump sum and this will help us to pay out more quickly. You can change the people named at any time by writing to us. Your wishes are not binding, but we will bear them in mind when making the payment.

If you prefer, you may be able to set up your own individual trust, so that we pay any lump sum to trustees appointed by you. We can provide you with a trust form or you can use your own - we'll need to see the original or a certified copy of the completed trust form. We recommend that you see a solicitor before setting up a trust.

If you die before your 75th birthday any lump sum paid on death will count towards your lifetime allowance. However, instead of your pension fund being paid out as a lump sum, it can be used to give your dependants an income for as long as they live - and any benefits paid in this way will not count towards your lifetime allowance.

You'll find more information about the Lifetime Allowance in the FAQ 'What are the tax rules?'.

How to apply

If you decide that a Personal Pension plan may be right for you, find out more about how to apply. The first step is to talk it through with a financial adviser to make sure it's the right pension plan for you. If you don't have an adviser, you can find one in your area at unbiased.co.uk.

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