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Group Executive Pension

The Skandia Group Executive Pension is a simple, flexible, tax-efficient plan, the performance of which is linked to funds of your choosing. This can be set up by an employer for directors, executives and employees to help them save for their future. Each member builds up a fund which is then used to provide them with pension benefits at their selected pension age. Normally 25% of the fund can be taken as a tax-free cash sum.

Who can take out a Group Executive Pension?

The scheme must be set up by an employer.

To be eligible to join the scheme you must normally be a director, executive or employee of an employer in the UK or with a subsidiary in the UK.

Minimum and maximum ages

The minimum age is 18 years and the maximum is 73 years.

Minimum contributions

The average member contribution is £200 monthly. Total scheme contribution £15,000 monthly.

Maximum contributions

The maximum personal contribution that individual members can make in any tax year cannot exceed 100% of their earnings from that employment.

Employer contributions are unlimited, although they will only receive tax relief on them if the local tax inspector deems them reasonable.

The Annual Allowance is the maximum amount that you can build up in all registered pension schemes before you become liable for tax. If your earnings are greater than the Annual Allowance you may still contribute 100% of your earnings and receive full tax relief, however any contributions exceeding the Annual Allowance will be subject to a tax charge.

The Annual Allowance has been set for the tax years shown as follows:

2008/09 – £235,000
2009/10 – £245,000
2010/11 – £255,000
2011/12 – £255,000
2012/13 – £255,000
2013/14 – £255,000
2014/15 – £255,000
2015/16 – £255,000

If the total amount built up in all of your registered pension schemes exceeds the Annual Allowance, you will be personally liable to a tax charge of 40% on the excess amount.

Your financial adviser will be able to provide you with more information.

Term

The minimum term is two years. All payments into the plan must cease by age 75. Benefits must be taken by age 75. This means that before the age of 75 you must have either purchased a lifetime annuity or transferred out to another plan/provider.

Advantages for the employee

Tax efficiency

There are a number of reasons why an executive pension can be a tax-efficient way of saving. Some of these include the following:

  • Your employer will deduct any personal contributions from your salary before tax so that you get immediate tax relief automatically.
  • Normally 25% of your fund can be taken as a tax-free cash sum when you start taking your pension benefits.
  • The funds you invest in are free from capital gains tax and generally free from income tax. With less tax paid, more goes towards the growth of your fund.

There may be a tax liability in some circumstances, for example where:

  • Contributions into your plan are funded from a tax-free cash sum received from a registered pension scheme.
  • The total amount built up in all of your registered pension schemes exceeds an amount known as the Annual Allowance (see maximum contributions for more details).
  • The total value of all your pension benefits exceeds the Lifetime Allowance when you start to take your pension benefits. For the 2008/09 tax year this is £1.65 million and it is set to rise in stages to £1.8 million by 2010/11 and remain level until 2015/2016.
Your financial adviser will be able to explain this to you in more detail if you think this applies to you.

Flexibility

Regular and single contributions can be paid into the plan. Once you have become a member you can also transfer in any benefits you hold in other UK-registered pension schemes and overseas schemes approved by Skandia. If a transfer payment includes Protected Rights, Safeguarded Rights or non-Safeguarded Rights these cannot be held under the Group Executive Pension but can be invested in a Personal Pension.

Regular contributions can be stopped, reduced or increased at any time without incurring extra costs or penalties. Earlier pension contracts may incur penalties.

If your employment status changes, you can easily switch to another Skandia pension product.

If you change employers, you can continue using your Skandia Executive Pension. Your new employer can set up a scheme with us, so you don’t have to set up a new pension for yourself.

Flexible benefit options

You can normally take 25% of your fund value as a tax-free cash sum. With the remainder of the fund you can either choose to take income withdrawal on your fund (subject to a minimum fund size) or purchase a lifetime annuity from the provider of your choice, using our free of charge Open Market Option. (Skandia does not offer an annuity product.)

Inflation-proof

We have options which allow you to increase your contributions each year to keep pace with inflation.

Minimum Death Benefit

When you die we will pay out 100% of your fund value provided you have not started taking your pension benefits. This is paid at the discretion of the Trustee, who is Skandia Life (Pensions Trustee) Limited, so you should tell them who you would like to receive the benefits. Benefits are normally paid free from inheritance tax.

Advantages for the employer

Skandia Master Trust No. 1

Skandia Life (Pensions Trustee) Limited is appointed as Trustee and Administrator of your Group Executive Pension scheme, freeing you from complex administration.

The Group Executive Pension will be set up under Master Trust No. 1. This offers many advantages, including:

  • the ability to offer a pension registration service at no charge. This offers many advantages to help save you time and effort

  • simplified paperwork on establishment of the scheme

  • rapid HM Revenue & Customs registration of the scheme and continued maintenance.

Investment Services

To give you more control over your investments, we offer Phased Investment and Portfolio Rebalancing free of charge.

Phased Investment helps you when market conditions are uncertain as it allows you to drip-feed lump sum payments into your selected funds over a period of time.

Portfolio Rebalancing enables you to keep your portfolio invested in the proportions you want by periodically realigning your funds according to their original proportions.

Further details about these services are available from your financial adviser.

Additional facilities

GroupView

GroupView is Skandia’s efficient online administration system. You can register online to view details such as your fund value, switch funds online and change your fund choice for future contributions.

Risks

You need to be aware that there are risks involved in taking out a Group Executive Pension Plan and we cannot guarantee the value of your pension fund and resulting benefits for a number of reasons. Some of these are detailed below:

  • The value of your pension fund cannot be guaranteed as it will depend on investment performance.

  • The value of fund units can go down as well as up and investment growth cannot be guaranteed.

  • Tax rules can change at any time, which may affect your pension.

  • The level of pension benefits payable cannot be guaranteed as they will depend on interest rates when you start taking your benefits.

  • The value of your pension fund may be less than expected if you stop or reduce contributions, or if you take your pension benefits earlier than you had planned.

  • If the Group Executive Pension starts with a single contribution and your employer cancels the scheme within 30 days, the amount returned may be less than was paid in.

This web page is only intended as a general introduction to the Skandia Group Executive Pension. Full details of the product can be found in the Skandia Group Executive Pension Scheme Booklet available from your financial adviser.

 

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