The later you start to save, the more expensive it's going to be for you to build up a fund. Leaving it just five years could make a big difference to the pension you receive when you retire.

Depending on the amount you want to put away, a delay of just ten years can more than double the amount you need to put by every month.

What is a stakeholder pension?

Stakeholder pensions are an initiative designed to encourage people to invest for their future. They have very low costs and are very flexible. Stakeholder pensions are not intended to replace occupational pensions, but can often be used alongside them.

How does the PMAS Stakeholder Pension work?

The money you invest is pooled with that of other investors and buys units in the stakeholder pension fund. At any time, the value of your personal fund is the number of units you hold multiplied by the unit price.

The value of your plan depends on the value of the investments we’ve made and it can go up and down in value.

Five years before the date you’ve chosen to start receiving your PMAS Stakeholder Pension, we’ll start lifestyling it. This means we gradually move your contributions and existing funds into a lower-risk (but lower reward) fund, which means what you’ve earned so far in the fund is more secure. There are no guarantees, however, with any investment.

When you take your benefits, you can take up to a quarter of your fund as a lump sum. The rest is then used to buy an annuity – a regular income – the amount of which will depend on how old you are, among other factors.

You can claim your pension at any time between 55 and 75. You don’t need to retire from work to start claiming. The earlier you choose to take your pension, the lower the regular income payments are likely to be.

The minimum age you can claim your pension is currently 50 but will go up to 55 in 2010.

What will I get when I retire?

The size of your fund will depend on how much you invest, how long you invest for, any charges, and the investment performance.

When you claim your fund, you can take up to one quarter of your fund as a lump sum which will be free of personal income tax and capital gains tax. You must convert the rest into a pension income, which is typically done by purchasing an annuity from an authorised provider. Police Mutual do not currently provide annuities. If you’re over your lifetime allowance when you claim your fund, a tax charge will apply on the excess.

Like all pensions, stakeholder pensions cannot be cashed in, except within the 30 day cancellation period you have when you first take out the plan.

Who can have a stakeholder pension?

Most people can benefit from a stakeholder pension, whether they are employed, self-employed or not employed, providing they are able to make sufficient contributions.

Employed – you can contribute to a stakeholder pension even if you’re part of an occupational (company) pension scheme. It’s a good way to boost your retirement income
Self-employed - a stakeholder pension could be particularly suitable for someone who is self-employed, such as a Retired Police Officer or an Officer's partner running their own business
Not employed - even if you’re not in work, you can put up to £3,600 gross (£2,880 net) into a pension per year and still receive tax relief – getting back tax you’ve not even paid
Children – there’s no lower age limit to stakeholder pensions, so even children can have a plan. You can help your children or grandchildren plan for their long-term future – the pension must be taken between age 55 and 75

Can I have a stakeholder pension if I am in the Police Pension Scheme (or another occupational pension scheme)?

You can start a PMAS Stakeholder Pension even if you have other pension arrangements. However, HM Revenue & Customs has set overall limits on the tax relief you can receive:

Annual allowance - you can contribute the greater of £3,600 (gross) or 100% of your gross UK earnings up to £235,000 per year (2008/2009 tax year) before you are subject to tax penalties
Lifetime allowance – you can contribute a maximum of £1.65 million (2008/2009 tax year) to all your pensions in your lifetime before you are subject to tax penalties*

Can I have a stakeholder pension instead of the Police Pension Scheme (or my occupational pension scheme)?

Our stakeholder pension can run alongside the Police Pension Scheme and other occupational schemes but isn’t a replacement for them. The life insurance and ill health pension offered by your occupational scheme are much higher than this pension can offer – you should always consider the Police pension first.

This is compounded by the fact that in most occupational pension schemes your employer makes contributions as well.

If you’ve got any doubts, seek independent financial advice.

How much can I pay?

The maximum you can pay is set by the tax threshold, which is subject to change, but is currently:

Annual allowance - you can contribute the greater of £3,600 (gross) or 100% of your gross UK earnings up to £235,000 per year (2008/2009 tax year)
Lifetime allowance – you can contribute a maximum of £1.65 million (2008/2009 tax year) to all your pensions in your lifetime

At the lower extreme, you can pay as little as £20 a month or as a one off payment. Call us on 0845 88 22 999 for further details.

Can I pay from salary?

No. Monthly payments to the PMAS Stakeholder Pension can only be made by Direct Debit. One-off payments should be made by cheque.

What are the tax advantages?

For every £80 you pay into your pension, £100 is invested. This is because the tax you’ve already paid on your income – at 20% - is given back to you and put into your stakeholder pension
Non-earners also receive this tax benefit - and so will get more tax relief than they've actually paid
Higher rate taxpayers can claim further tax relief through their tax return
Pension funds also enjoy tax-efficient growth, so your pension fund will grow at a higher rate than a taxed investment
When you retire you can take up to one quarter of your fund as a tax-free lump sum. The remainder will go to purchase a pension income, on which you may pay income tax
This represents the current tax position but tax legislation may change in the future

How will I know how my fund is doing?

We will send you a statement every year.

Can I apply over the telephone?

Yes. We will then send you a copy of the paperwork for your records. You’ll need your bank details and the applicant’s National Insurance number handy.

Can I transfer another pension to a stakeholder pension?

Your PMAS Stakeholder Pension can accept transfers from most other pension arrangements, although you will need to check if your existing pension provider charges you for this. You should also seek advice to see whether transferring is the correct option for you. Transfers of this type do not normally count towards your annual allowance. Contact us on 0845 88 22 999 for details.

What is a decision tree?

A decision tree is a type of flow chart which helps you make decisions. They’ve been put together by the FSA, the financial services watchdog, to help you choose your pension options. There are different versions for the employed, self-employed and not employed.

You can download the decision trees here.

What happens if I die before I retire?

The fund you have built up will normally go to your chosen beneficiaries. You can tell us who you’d like to be a beneficiary on the application form or when you call to apply.

Providing you have sufficient lifetime allowance at the time of death, any payment made will be tax-free.

* Tax legislation may change.

PMAS Stakeholder Pension

Frequently asked questions

I'm only young, why do I need a pension now?