Pensions and annuities FAQs

Pensions

How do I start paying into a pension plan?

It’s possible that your employer has set up a company pension scheme. In this case it might be a good idea for you to consider joining this scheme as most employers would top-up the money you invest.

If you don't have an employer who offers a company pension scheme and you want to apply to set up a pension plan with us simply fill in our online form.

Please note company pensions are changing. Auto-enrolment started in October 2012 with the largest employers first. Your employer will let you know when this affects your pension scheme. You can find out  more information here: Auto enrolment and pension reform.

Why is it important that I save towards my retirement? Do I need my own pension?

You need your own pension because the state allowances paid by the government aren't that generous.

If you qualified for the full basic state pension for single people (like most people who work full time from their late 20s)*, you would get £113.10 a week in 2014-15, which works out at £5,881.20 a year.

You may also be entitled to an additional State Pension, which depends on your income. Pension Credit may also be available. The rules for these are complex - you can find out more at gov.uk.

Compare this to your current income now and what you'd like it to be in the future. Having your own pension can help cover the shortfall. At Standard Life we help you set up a level of contributions to your pension plan adapted to the level of pension you are aiming for when you retire.

You can use our pension planner to see how much you should save in your pension plan every month

* Source is gov.uk - you need 30 years to qualify.

 

How do I change the personal details you hold for me?

It’s really important that we have your up to date contact details so we can get in touch with important information and let you know about any changes to your plan(s).  If you are registered for our online servicing you can update this easily. Just login, select a plan and click on ‘Change My…’.  Alternatively you can phone our customer centre on 0800 634 7474 (call charges will vary) and they’ll be happy to help

What happens if I change jobs?

We recommend that you find out if your new employer has a company pension scheme and whether they make payments to it. If they do, it may be in your best interest to  join the scheme.. If you are unsure, we strongly recommend you seek financial advice.

You can keep your existing plan and still make payments to it,  ensuring that you don't go over the Annual Allowance. You can find more information on the HMRC website.

You can pay into as many pensions as you want, although if you are over the HMRC tax relief allowance or annual allowance you may have to pay penalties.

What fund(s) is my pension invested in? How do I make changes?

To view the fund(s) your pension is invested in and make changes to where it's invested, login in into our online servicing. If you aren’t registered yet, click on the “Register” button.
Alternatively you can call us on 0800 634 7474. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

Can I transfer other pensions into my Standard Life plan?

You can and this could be beneficial in terms of potential annuity benefits. However, transferring can be a big step and so we strongly recommend that you call us on 0845 60 60 191 (call charges will vary) or speak to a financial adviser before embarking on a pension transfer. You should bear in mind that transferring your pension won't necessarily mean you'll get more than you otherwise would have done, and you may be giving up valuable guarantees.

Can I pay more into my pension?

Yes. You can pay up to 100% of your salary into your pension as long as you don’t go over the HMRC tax relief allowance. If you want to increase the amount you pay into your pension, call us on 0800 634 7474 (call charges will vary).

What happens if I lose my job or take a career break?

We know it's not always possible to make payments into your pension plan - so we're flexible.

You can reduce or stop regular payments into your pension. You can also take a payment holiday.

However, we'll continue to take charges each year. This could mean that if you stop making payments and don't restart them, our charges could reduce your plan value by the time you retire.

If you decide to reduce or stop the payments you are making into your pension, any illustration we sent you previously which takes in account those payments would be inaccurate. If you want to receive new illustrations please contact us on 0800 634 7474. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

Based on current tax rules, even if you're not earning you can still make payments to your pension plan up to £2,880 each year - which the tax man will top up to £3,600. If you make pension contributions after electing flexible drawdown with another provider, they will subject to tax charges since you no longer have an annual allowance.

How does tax relief on pensions work and how do I benefit from it?

The government wants people to save for their retirement. But it realises that people might not want to commit to saving in a pension that can't be touched for some years. So to encourage people to save, it gives tax relief on your pension contributions.

As an example, if you invest £200 a month, the taxman currently adds £50 - making £250 in total. This happens automatically if you are eligible for tax relief. If you sacrifice part of your salary in exchange for a payment from your employer to the pension scheme,  you don't get tax relief on that payment but you do save tax on the salary you have sacrificed.

If you're a higher or additional rate taxpayer, you may qualify for extra tax relief. If this is the case we'll claim the first 20% tax relief for you and add it to your plan. You'll need to claim the additional tax relief by contacting HMRC.

Laws and tax rules may change in the future. The information here is based on our understanding in April 2014. Your personal circumstances also have an impact on tax treatment.

What will £1,000 today buy after 30 years of inflation?

Good question - the answer, of course, depends on the rate of inflation.

If inflation averaged 2.5% over the next 30 years, the price of goods would approximately double. So an income of £1,000 in 30 years time would buy the same as what £468 buys you today.

To make this calculation yourself based on your expected income and your desired retirement year, you can try this  calculator www.whatsthecost.com/cpi.aspx

Are there any risks in having a pension plan?

When you invest in a pension plan, your money is invested into investment funds. These investment funds are invested in a variety of things for example, the stock market, bonds, property or cash. The type of investment will vary depending on which investment funds you have chosen. As with any investment the value of your fund can go up or down and may be worth less than what you paid in.

There are other potential risks that you need to take into consideration when you decide to invest in a pension. You can't normally access the value of your plan until you've reached the age of 55 and at no point can you cash in your pension.

We strongly recommend that you seek financial advice before choosing a pension.  You can speak to a financial adviser (there may be a cost for this) or call Standard Life Direct on 0845 60 60 191 (call charges will vary). The person you are speaking to will be able to discuss with you the amount you should invest based on your desired level of pension income and your financial situation. They can also make you aware of any potential additional risks that might be attached to the type of pension plan and investment funds you choose.

If you are looking for an adviser, use our find an adviser tool to help you locate one near to you.

Can I make payments into more than one plan at a time?

Yes, but you need to be aware of the rules regarding payments that exceed the Annual Allowance. You can find more information on the HMRC website. If you are unsure, call us on 0845 60 60 191. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary).

Can my employer pay into my Standard Life pension?

The majority of Standard Life pension products accept payments from your employer or from other third parties (spouse/civil partner, parents etc). Their payments would count towards your Annual Allowance total Go to the HMRC website for full information or alternatively call us on 0845 60 60 191. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

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Retirement

When's the earliest I can take the benefits from my pension plan?

Normally, the earliest you can receive income from your plan is age 55 but depending on your occupation this may be available before then. However, generally, the longer you delay taking it, the more you are likely to receive. If you delay your decision to retire, it is worth remembering that your pension plan will continue to be invested. However as with any investment the value of your fund can go up or down and may be worth less than what you paid in.

Based on current rules, you can also boost state pension(s) if you delay claiming your state pension. You will get a 1% increase to your weekly pension for every five weeks you defer (10.4% a year).*

*Source: www.gov.uk

Can I just take money out of my pension?

No - When you retire you can normally take 25% of your fund value as a tax free lump sum.. However, there are specific rules about when and how you can access this lump sum. For more information, call us on 0800 634 7474. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary).

If you die before taking your benefits we will normally pay out the value of your plan as a lump sum or pension to your beneficiaries. You can let us know who you would like to receive the death benefits. You may also be able to set the plan up under trust.

Please contact us on 0800 634 7474 (call charges will vary) or speak to your financial adviser. Please note the death benefits from some older plans may be different - please read your plan documents or call us for more information.

What happens when I approach retirement?

5 years before

When approaching retirement you should have a deeper look into your pension as you still have time to make some changes if necessary. Here is what we recommend you to do in order to be sure you are on top of everything:

1) Start by looking at your pension plan value with our online servicing.
2) Use our calculator to see the projected value of your plan.
3) Based on what our calculator is showing and your expectation, you can pay more into your pension by:

  • Investing a lump sum: The money you invest in your pension now will have more time in which to benefit from any potential growth than money invested later. Therefore, inheritances and windfalls provide a good opportunity to invest a lump sum of money into your pension.
  • Increasing your regular payments: Because your salary might increase over the years, you might want to increase your payments to keep them in line with inflation.
  • Using your spare cash: If you pay off a loan or a debt you might end up with more money each month. Investing it in your pension could be a good way to increase your income in retirement.

4) If you aren’t sure about what to do or if you feel like you need guidance, you should call us on 0845 272 8810 or speak to a financial adviser. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

6 months before
If you are a Standard Life customer, we’ll send information to help you make decisions about your income in retirement.

If you have any questions or if you want a personalised retirement illustration based on your individual circumstances, please call us on 0800 634 7474 (call charges will vary). For example, if you have other sources of revenue, this could change your options.

Important information
If your fund value is in excess of £30,000, Standard Life offer income drawdown in our Self Invested Personal Pension. This gives you the opportunity to take income from your pension while keeping your fund invested. You still benefit from any increase in your fund value. As with any investment the value of your fund can go up or down and may be worth less than what you paid in.

If the total value of all your pension plans (held with Standard Life, other providers or through your employer pension scheme) is less than £30,000 in the current tax year and you are between the age of 60 and 75, you might be able to take your pension as a lump sum.

I am about to retire. What is going to happen?

6 weeks before

If you are a Standard Life customer, you will receive a letter advising you that your retirement date is approaching.

In this letter we detail the different options available to you. In simple terms you should have hopefully built up a sum of money. Upon retirement, you can normally take 25% of that money out in one go, tax-free. For example, if your fund is worth £60,000 you can take out £15,000 as a lump sum. The remainder is used to provide you with an income for the rest of your life, which will be taxed as earned income. This is usually done by buying what is known as an annuity but there are other flexible options available to you. Read through our Retirement guide (PDF, 630KB) for more information.

Remember that at any time before you are due to retire you can boost your pension by topping up your fund. You have several options to do so.

Can I retire early?

You can normally take your benefits at any time after age 55 which is the current minimum retirement age. You may be able to take benefits before then if you are in a special occupation or are in ill health:

  • Early Retirement due to ill health

You can take benefits before the normal minimum pension age if you suffer from permanent physical or mental impairment. The benefits payable are a pension only or a tax-free lump sum and a reduced pension.

  • Early Retirement due to Serious ill health

You can claim your benefits if you suffer from ill health and if your life expectancy is less than 12 months. You will receive a tax-free lump sum up to the Lifetime Allowance (LTA). The LTA is a revenue limit on the total value of pension benefits you are allowed to have without paying a tax penalty. You can find more information on the HMRC website.

In order to know if you qualify for early retirement call us on 0800 634 7474 as we will need to ask you some questions. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

Can I change my retirement date?

Yes. Call us on 0800 634 7474 so we can discuss your options. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

What happens if I die soon after I retire?

The benefits payable on death depend on the way you have chosen to set up your annuity. For example, if your annuity includes a guarantee period then the income will continue to the end of the guarantee and then stop (the value of that income will usually be included in your estate for inheritance tax purposes)

If you have chosen an annuity that pays an income for your life only without any guarantee period then there will be nothing paid out on your death.

You can set up your annuity to provide a pension to a dependent - You have the choice of including this when setting up your annuity (this can only be paid to a husband, wife, civil partner or dependant adult).

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Annuities

Do I have to buy an annuity from Standard Life?

No you have the right to shop around and buy your annuity from any annuity provider. Read the Retirement guide for more information.

Can I change my mind when I’ve decided to take an annuity?

Yes, when you take out your annuity you have a legal right to cancel your contract within 30 days if you change your mind. The 30-day period starts from the the date you receive the annuity terms and conditions. If you had a Standard Life pension, bought an annuity from us, and you now want to cancel or still have some questions, call us on 0845 606 0384 (call charges will vary). If you had chosen another pension provider but had bought an annuity from Standard Life, call us on 0845 606 0007 (call charges will vary). We’ll explain anything you don’t understand or we’ll help you to get financial advice.

Once the 30 days have passed you won't be able to cancel the annuity or change any of the options you've chosen.

It's important to consider each of the options when you buy an annuity. Once it's set up you can't make changes to it, cash it in or transfer it to another provider.

Why am I being taxed on my pension income?

Even if you're retired, you still have to pay tax.

When you take out your annuity, HM Revenue & Customs tells us which tax code to use in relation to your income.  We deduct tax relating to that code.  If there has been an underpayment in tax, this could mean a reduction in your payments of up to 50% until any underpaid tax has been paid.  The tax deducted is sent to HM Revenue & Customs.

In most cases the tax will be Pay As You Earn (PAYE) tax and if you have a query about the amount being deducted, or the tax code itself, then:

If you have a Retirement Annuity Contract please contact:

HM Revenue & Customs
Pay As You Earn
PO Box 4000
Cardiff
CF14 8HR

Or call on 0845 3000 627 and quote tax reference 206/RAC363. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

For any other pension annuity please contact:

HM Revenue & Customs
Pay As You Earn
PO Box 1000
Newcastle Upon Tyne
NE98 1WY

Or call them on 0845 3000 627 (call charges will vary) and quote tax reference 961/8723350.

If you think the tax code is wrong then you need to contact HM Revenue & Customs. We'll help if we can but HM Revenue & Customs will only review tax codes if they are asked by the person whose code it is.

If you are receiving payments from a Purchased Life Annuity then you may be paying Schedule D Tax. If you don't think you should have tax deducted from your annuity, call us on 0845 60 60 007 and we'll discuss this with you. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

If you have any other questions about Schedule D tax then please contact:

HM Revenue & Customs
Saxon House
1 Causeway Lane
Leicester
LE1 4AA

Or call on 0845 3667 868 (call charges will vary).

You can find more information about tax and pensions at the HMRC website.

This link is provided for general information purposes only. Standard Life accepts no responsibility for information contained in the site or for the site not being available at all times.

Tax and legislation may change. The information we have given here is based on our current understanding of law and HM Revenue & Customs practice.

Calls may be monitored and/or recorded to protect both you and us and help with our training (call charges will vary).

I'm moving abroad - can I still receive income from my annuity?

Of course, just contact us on 0800 634 7474 with the details and we'll go through your options and the way these affect the tax you pay on your annuity. (Calls may be monitored and /or recorded to protect both you and us and help with our training. Call charges will vary.)

We can keep on making payments to your UK bank account or set up payments for you in the country that you're moving to. There would be a bank charge made for each payment sent abroad which would be deducted from the payment. Currency changes would also affect the amount that you receive.

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State pension and tax

What can I expect from the State Pension?

Under current rules, the level of state pension an individual receives depends on the number of qualifying years (during which they’ve paid national insurance contributions) they’ve worked for. Also if at any particular time an individual wasn’t employed and was claiming benefits, the state would have credited them with national insurance contributions in proportion to the time they’ve claimed benefits.

To get the full state pension an individual needs to have a total of 30 qualifying years*. More information can be found on the Pension Service Website along with the up to date full basic state pension allowance.

Note that you can get a state pension forecast sent to you. For more information about pension forecast visit the gov.uk website.

*Source: www.gov.uk

I'm filling in my tax return and need to know what income I received from my annuity.

We normally send you a P60 at the end of the tax year showing how much income you've received from your annuity. If you can't find this or haven't received it then contact us on 0800 634 7474 (call charges will vary) and we can give you the information you need.

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More

I have more questions about pensions.

If you haven’t found the answer you were looking for in these FAQs, you can read our Retirement guide (PDF, 509kb).

You can also find very useful information on the HMRC website, or gov.uk

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Standard Life accepts no responsibility for the information contained in the websites referred to. These are provided for general information only.

2014 Budget update – annuities and pensions

Changes to workplace pensions

On 19 March, the Chancellor announced major
changes to UK pensions and annuities.

Frequently asked questions

We already have the answers to many of the questions you may have.