Common Stakeholder Pension Enquiries

What is a stakeholder pension?
Stakeholder pensions are a type of low-cost pension that have been available since 6th April 2001. Stakeholder pensions are not State pensions, but are provided by financial services companies like the Halifax and are designed to build up a sum of money in a tax-efficient way for use later in life. Currently benefits can be taken between the ages of 55 and 75.

The Government has set minimum standards that companies must meet for a stakeholder pension. These are to do with payment levels, costs, access to your funds and terms and conditions.
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What are the Government standards for stakeholder pensions?
The table below sets out some of the main stakeholder requirements and shows how our plan meets those standards: 

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Are there risks to a stakeholder pension?
Yes, the value of your investment is based on the performance of the stock market, and so the value of your investment can go down as well as up and you may get back less than you originally invested.
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How much can I pay into my plan?
Each year, tax relief is available on payments which don’t exceed your relevant UK earnings, or £3,600 if higher. If you’re a higher rate taxpayer, you can normally claim additional tax relief via your self-assessment tax return. Any payments you make above this level will be refunded.
 
Anyone can make contributions into your plan for you, as long as you are eligible to make contributions and are aware that the contributions are being made. If you're employed, employer contributions can be made on your behalf, but please be aware your plan won’t receive tax relief on any payments made by an employer, or on transfer payments.
 
There is also a limit on the total payments that can be made.  This includes your own payments and those made on your behalf, for example, by an employer. From April 2011 the government reduced this overall limit to £50,000 a year.  If your total pension savings are in excess of this limit then you will incur a tax charge.

The value of tax benefits of your plan depend on your individual circumstances. Your circumstances and tax rules may change in the future.
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Can I increase my contributions?
You can increase your contributions as long as you do not exceed the amounts shown above. Please see our Top Up page to find out how you can increase your contributions.
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How are my contributions invested?
You can either choose the investment funds you want your money to be invested in or let us choose for you.

If you take the first approach, you can select from a range of single-priced unit-linked Halifax Pension Funds. We provide comprehensive information on our range of funds.

If you take the second approach, we'll invest your contributions using our Lifestyle option. Provided you are more than five years away from your selected retirement date, 38% of each contribution paid to Lifestyle will be invested in the Halifax UK Gilt & Fixed Interest Pension Fund, 26% into the Pelican Fund, 25% into the High Income Fund and 11% will be invested in the Halifax International Growth Pension Fund. Five years from your retirement we will start to switch your accumulated investment, in monthly amounts, to the Gilt and Fixed Interest Pension Fund.
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Can I switch between funds?
You can switch your existing fund holding whenever you want. There is currently no administration fee for switching.
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When can I take my benefits?
Currently, you can start to take your benefits (including contracted-out benefits) at any age between 55 and 75, even if you are still working. 
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How can I take my benefits?
When you take your pension benefits, you can choose to take up to a quarter of your fund (including any contracted-out benefits) or a quarter of your available lifetime allowance if less, as a cash sum. This sum is currently tax-free. The pension you buy, which can continue to be paid to your spouse, civil partner or other dependant after your death, is taxed as earned income. HM Revenue & Customs sets an overall limit on the value of the benefits you can take. This is known as the lifetime allowance. Each time you take any benefits, the value taken is measured against your remaining lifetime allowance. If the value of the benefits taken exceeds the remaining balance of your lifetime allowance, the excess will be subject to a tax charge of 55% if they are taken as cash, and 25% if they are taken as a pension. Note that any pension is also taxed as earned income. The standard lifetime allowance for 2010/2011 is £1.8m.

If you die before you take your benefits, lump sum benefits are normally free of inheritance, income and capital gains taxes, although they will be tested against your remaining lifetime allowance. Any pensions provided for your spouse or civil partner from any contracted-out benefits will not be tested against your remaining lifetime allowance, but they will be taxed as earned income
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What tax will I pay?
You will normally get tax relief on your payments (and those made into your plan by someone else, but not by your employer) up to £3,600 or 100% of your UK earnings (including tax relief), whichever is greater, in each tax year.

You pay your contributions net of basic rate tax relief (whether you are a taxpayer or not) and we reclaim the tax from HM Revenue & Customs and apply it to your plan. If you are a higher rate taxpayer, you reclaim relief at the difference between the basic and the higher rate through your self-assessment tax return.

The Treasury sets an annual allowance each year, and the annual allowance for the current tax year (2010/11) is £255,000.

If the total contributions you pay or that are paid on your behalf by someone else, including your employer (except for transfers, contracted-out contributions, any contributions you can't get tax relief on and pension credits following a divorce/dissolution of a civil partnership) to all registered pension schemes of which you are a member exceed the annual allowance, you will incur a tax charge of 40% of the gross contribution in excess of the annual allowance. This tax charge will be recovered through your tax return and the amount invested in your registered pension schemes will be unaffected. (If you are a member of a defined benefits scheme, such as a final salary scheme, the value of the increase in your pension entitlement during the year will be counted against the annual allowance rather than the contributions you have made to that scheme).

The investments held in a Stakeholder Pension Plan grow free of tax, apart from any tax on dividend income from UK shares, which we can't reclaim.

Current tax legislation may change in the future and is not guaranteed. 
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What are the charges? Can they change in the future?
There is no initial charge deducted from your contributions. There is currently a yearly charge of 1.45% of the value of the funds you accumulate, reducing to 1% a year after 10 years.

Charges can change in the future, but we'll tell you of any increases at the earliest possible opportunity.
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Can I cancel my stakeholder pension?
After your application is accepted you will receive a notice of your right to cancel. You will then have 30 days in which to change your mind. If this right is exercised and you have paid in lump sums, any monies returned may be less than those originally paid if the value of the underlying assets has fallen.
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