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Stakeholder Pension

Frequently asked questions

To help you understand the facts about Aviva Stakeholder Pension, we've put together some easy-to-follow frequently asked Stakeholder Pension questions and answers:

Are you eligible for an Aviva Stakeholder Pension?

To be eligible for an Aviva Stakeholder Pension you need to be under 75 years of age. To benefit from tax relief, you normally need to be resident in the UK, although tax relief may also be available if either you or your spouse/civil partner works overseas for the UK Government, or you have earnings chargeable to UK Income Tax for the tax year in question. 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.

If you have a Stakeholder Pension with Aviva, 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 as this may affect what you can pay.

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 a financial adviser.

What would you get from the State Pension?

If you are single, a married man or woman or civil partner (who qualify with their own National Insurance contributions) you'd receive just £113.10 maximum a week from the Basic State Pension in the current tax year (2014/15), or as a married man, woman or civil partner (using his wife's, her husband's or their civil partner's National Insurance contributions record) you would get a total between you of £180.90 per week.

If you are, or have been, employed you may also qualify for a combination of the State Earnings Related Pension Scheme (SERPS) and the State Second Pension (S2P). This isn't available to those who have been self-employed for all their working life.

The actual amount of Basic State Pension, SERPS and S2P you receive will depend on the National Insurance contributions you've paid during your working life. 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 Stakeholder Pension with Aviva will not affect your entitlement to the Basic State Pension.

Pension Credit

If you're a pensioner living in Great Britain, Pension Credit would top up your weekly income to a guaranteed minimum of (for the 2014/15 tax year):

  • £148.35 if you are a single person
  • £226.50 if you are claiming as a married couple or civil partners.

In addition, you may get Savings Credit, if you or your partner are over age 65 and you have saved some money towards your retirement. The Savings Credit can be up to £16.80 a week if you're single, or £20.70 a week if you have a partner. For further details please visit gov.uk

How much can you invest?

You can start your Aviva Stakeholder Pension with as little as £20, which can be paid by your employer if you have one. You can also start a Stakeholder Pension plan if you're not employed and don't have any earnings. You can pay as much as you want to into your plan up to a maximum of £3,600 a year (inclusive of tax relief) or 100% of your UK taxable earnings if greater.

There is an overall limit set by HM Revenue & Customs called the Annual Allowance, which is £40,000 in the tax year 2014/15. If you or your employer make payments above the Annual Allowance, you may be subject to a tax charge.

Any statement about tax 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. The value of your pension fund can go down as well as up and may be worth less than the amount paid in.

You can make regular monthly or yearly payments into your Aviva Stakeholder 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.

You can increase or reduce the amount you pay at any time, without paying a penalty fee. If you want to stop paying altogether (for example, if you've left work to raise a family), you can stop your payments for up to 12 months at a time whenever you like, although this will affect how the fund grows. 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. Aviva will only accept payments which are eligible for tax relief.

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 tax relief:

  • Tax relief
    There's no limit on the amount that you can pay into your Stakeholder Pension plan 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 all your plans up to £3,600 a year or 100% of your UK taxable earnings if greater. Aviva won't accept payments from you that don't qualify for tax relief.

  • Annual Allowance
    The Annual Allowance is an overall limit, which is £40,000 in the tax year 2014/15. If total payments from you and your employer to all your pension plans are above the Annual Allowance, you may be subject to a tax charge.

  • Lifetime Allowance
    The Lifetime Allowance is a limit on the amount of money you can build up in all your pension plans without losing tax advantages. Any amount above this allowance will be subject to a tax charge when benefits are paid. The Lifetime Allowance is £1.25 million in the tax year 2014/15.

    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, we strongly recommend that you talk to a financial adviser before taking out a pension plan.

Any statement about tax 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. The value of your pension fund can go down as well as up and may be worth less than the amount paid in.

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 £80 into your plan, HMRC will add £20 to this, so the total invested is £100. This is known as basic rate tax relief and you will get this even if you don't pay tax.

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

Any statement about tax 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. The value of your pension fund can go down as well as up and may be worth less than the amount paid in.

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

When you retire, you will need to use your fund to provide an income in retirement. Most people use their fund to buy an annuity which provides a regular income. You can use the whole of your fund to buy an annuity or take part of the fund as a tax-free lump sum and use the rest to buy a smaller annuity. Normally, you can have up to a quarter (25%) of your fund paid to you as a tax-free lump sum.

You can choose from a number of different types of annuity, such as an annuity that increases every year or one that continues to be paid to your spouse after your death. Tax will be deducted from your annuity before it's paid to you. If you don't pay Income Tax, you can arrange for your annuity to be paid without tax being deducted.

You don't have to take your annuity from Aviva - you can choose to move your fund to another provider when you retire. 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 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. The value of your pension fund can go down as well as up and may be worth less than the amount paid in.

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 can carry on paying into your private pension as well as taking out a Stakeholder Pension Plan.

In most cases, you can also move the money that you've built up in other pension schemes into an Aviva Stakeholder Pension, now or in the future.

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.

What are unit-linked funds?

Unit-linked investment funds are divided up into equal parts called units. Your investment will buy a certain number of units in the fund and a unit's price will be dependant on the performance of the fund. Each of our funds is given a risk/return rating, ranging from 1 (low) to 5 (high) - you can find out more about the risks associated with investing.

Bear in mind that all investments can go down in value as well as up and your pension fund may be worth less than the amount paid in.

What are the charges?

The charge is just 0.55% of the fund value each year. This makes an Aviva Stakeholder Pension even better value for money, as these low charges mean that more of your money is working for you from day one. The charge covers the cost of plan administration and looking after your investments.

If your fund is more than £50,000, we will reduce the charge each month. The large fund discount reduces the amount of the charge as your fund grows- up to a maximum of 0.1% of the value of the fund each year. Find out more about the large fund discount in our member guide (PDF).

Fund value Annual refund %
Less than £50,000 0.00%
£50,000 - £99,999.99 0.05%
£100,000 or above 0.10%
What happens if you die before you retire?

If you die before you start receiving the benefits from your pension plan, we'll normally pay the full value of your fund as a lump sum.

You can specify the person(s) you would like to receive all or part of the 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 on us, 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 sums 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. We recommend that you seek professional advice before setting up a trust.

Any lump sum paid on death will count towards your Lifetime Allowance. However, instead of your fund being paid out as a lump sum, it can be used to give your dependants an income - 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?'.

What's the next step?

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.

Ready to take the next step?

If you and your adviser agree that an Aviva Stakeholder Pension is right for you, your adviser will provide you with all the information you'll need to apply. This will include:

  • A key features document, which explains the aims and risks of the plan and answers some frequently asked questions.
  • A personal illustration, which gives you an estimate of what your investment in the pension plan may be worth at retirement age.
  • An application form, which should take just a few minutes to complete.

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