Personal Pension

The Skandia Personal Pension is a tax-efficient plan, the performance of which is linked to funds of your choosing designed to help you save for your future. The Plan is held under the Skandia Personal Pension Scheme, which is a registered pension scheme. You build up a fund which is then used to provide you with pension benefits at your chosen pension age. Normally 25% of your fund value can be taken as a tax-free cash sum.

Who can take out a personal pension?

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

Minimum and maximum ages

Newborn and 72 years. If you are under 16, or under 18 and not in employment, the personal pension must be taken out by a legal guardian on your behalf.

Minimum contributions

£100 monthly (£5 top-up)
£1,000 yearly (£50 top-up)
Transfer payment £5,000 (£500 top-up)
Single contribution £2,500 (£500 top-up)

Maximum contributions

Skandia will only accept personal contributions that qualify for tax relief. This means you can personally contribute up to £3,600 gross each year into a Personal Pension Plan, regardless of your earnings or employment status. If you have UK earnings chargeable to UK income tax you can pay up to 100% of those earnings as personal contributions each year, or £3,600 if greater.

If you are employed, your employer can also make contributions into your Personal Pension Plan.

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.

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 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:

• the contributions made 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 taking 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

The Plan can accept regular contributions, single contributions and transfer payments from other UK-registered pension schemes or overseas schemes approved by Skandia. In conjunction with any of these payment types the plan can also 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.

Regular contributions can be stopped, reduced or increased at any time without incurring extra costs or penalties.

If your employment status changes you may be able to continue with your plan. You can also easily switch to another Skandia pension product.

Loyalty bonus

Certain plans attract a loyalty bonus. These plans receive extra bonus units every five years based on all lump sum contributions. Once awarded, bonus units cannot be lost.

Inflation-proof

We have options 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 pension fund to provide benefits when you reach your selected pension age. Normally you can take 25% of your fund value as a tax-free cash sum and 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 (Skandia do not offer an annuity product)

• 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

If you die before taking your pension benefits, we will normally pay out 100% of your fund value. 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. If your fund includes Protected Rights, however, that element must be used to provide a pension income for your spouse or civil partner. If you outlive your spouse or civil partner, the Protected Rights fund can be paid as a lump sum to a person named by you, or to your estate if you have not named anyone. If you have a Safeguarded Rights fund, it can be paid as a lump sum to a person named by you, or to your estate if you have not named anyone. Cash sums paid to a nominated beneficiary on death will normally be free from inheritance tax.

Investment services

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

Regular reviews

Each year Skandia will send you a statement showing the current value of your pension fund and your projected benefits at your selected retirement age. 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.

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 within your investment 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 Personal Pension. Full details of the product can be found in the Skandia Personal Pension Member’s Guide, available from your financial adviser.

go to top

Printer friendly version.
Glossary.

Our online services

Information on this website is not intended for Hong Kong residents. Information on this website about Skandia Group Companies is intended for UK residents only, unless it relates to Royal Skandia, Skandia Life Norge or Suomen Sivuliike. Skandia Group companies do not offer investment advice and no information on this website should be construed as such.

Calls may be monitored and recorded for training purposes and to avoid misunderstandings.