Group Personal Pension

The Skandia Group Personal Pension is a group of individual Personal Pensions that an employer can set up for employees.

Who can take out a personal pension?

Any UK resident, subject to our age limits and scheme criteria.

Minimum and maximum ages

The minimum age is 16 and the maximum 72 years.

Minimum contributions

The average member contribution is £150 monthly. Total scheme contribution £10,000 monthly.

Maximum contributions

Skandia will only accept personal contributions that qualify for tax relief. This means you can personally contribute up to £3,600 each year into a Personal Pension Plan regardless of your earnings. If your UK earnings chargeable to UK income tax exceed £3,600 you can pay personal contributions each year up to 100% of these earnings.

Your employer can also make contributions into your Personal Pension Plan.

The Annual Allowance is the maximum amount that you can accrue 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

If the total amount accrued in all 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.

Benefits must be taken by age 75. All payments into the plan must cease by age 75.

Advantages

Tax efficiency

There are a number of reasons why a personal pension can be a tax-efficient way of saving. These include:

• Basic rate income tax relief is given on personal contributions straight away as you pay these to us net of basic rate tax – for example, if you pay us £80 this will be grossed up to £100. If you are a higher rate taxpayer you can claim any further tax relief through your self-assessment.
• Normally 25% of your fund can be taken as a tax-free cash sum on drawing 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 accrued in all 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 draw 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.

Your financial adviser will be able to explain this to you in more detail if you think this applies to you.

Flexibility

The Plan can accept regular contributions and single contributions and, in conjunction with these, can be used to contract out of the State Second Pension (S2P). S2P normally only applies to employed individuals and is in addition to the basic state pension. By contracting out you give up your future S2P entitlement and in return the National Insurance Contributions Office rebates some of your National Insurance Contribution into your pension plan to help you build up a replacement.

If you have benefits in other UK-registered pension schemes, these can also be transferred into the Plan. Regular contributions can be stopped, reduced or increased at any time without incurring extra costs or penalties. Previous contract ranges may incur penalties.

If your employment status changes, you may be able to continue with your plan or switch to another Skandia pension product. Your Member’s Guide will provide you with more details.

Inflation-proof

Options exist which allow you to increase your contributions each year to keep pace with inflation.

Flexible benefit options

Skandia offers you a number of ways to use your fund to provide benefits at your pension age. Normally 25% of your fund value used to provide benefits can be taken as a tax-free cash sum. With the remainder of the fund you can:

• purchase a lifetime annuity from the provider of your choice using our free of charge Open Market Option

• buy your lifetime annuity in a number of stages, thereby phasing your benefits over a period of time

• remain invested, while taking income withdrawals from your pension fund. By doing this you retain the potential for further tax-efficient growth. At age 75 you will need to transfer to another suitable product – with Skandia, if available, or another provider – to continue income withdrawals, or buy a lifetime annuity.

Death benefit

For money that represents contributions that you or your employer have personally paid into a pension we will pay out 100% of your fund value on your death before drawing benefits. This is paid at the discretion of the Scheme Administrator, Skandia Life Assurance Company Limited, so you should tell them who you would like to receive the benefits. These benefits are normally paid free from inheritance tax. For other sources of money, for example as a result of a divorce settlement or contracting out of the S2P, a lump sum may be possible depending on your circumstances, which may be subject to inheritance tax.

Regular reviews

Each year Skandia will send you a statement showing the current value of your pension fund and your projected benefits at your pension date. Your projected figures will include an estimate of what your pension could be worth in today’s terms, to illustrate the effect of inflation.

If you wish, your annual statement can also include details of your State Pension entitlement.

Additional facilities

Lifestyle Option

This option enables you to protect any investment gains, and reduce the impact of stock market fluctuations. Five or ten years (whichever your Group Personal Pension Scheme chooses) before your Selected Pension Age, we gradually switch your pension fund automatically into less volatile gilts and cash.

When you join an employer’s scheme, your employer will be able to tell you whether this option is available to you and provide you with more information.

GroupView

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

Risks

You need to be aware that there are risks involved in taking out a personal pension 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 it 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 you start your plan with a lump sum contribution and cancel within 30 days, the amount returned may be less than you paid in.

• If you use the plan to contract out of the State Second Pension (S2P), we cannot guarantee that the benefits from the personal pension will match the benefits you give up.

This web page is only intended as a general introduction to the Skandia Group Personal Pension. Full details of the product can be found in the Skandia Group Personal Pension Member’s Guide, available from your financial adviser.

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