Stakeholder Pension

To help you understand the facts about Stakeholder Pensions, we've put together some easy-to-follow frequently asked Stakeholder Pension questions and answers:

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Are you eligible for a Stakeholder Pension?

To be eligible for a Norwich Union Stakeholder Pension you need to be under 75 years of age and resident in the UK. You're classed as 'resident' if you live in the UK all or most of the time - if you're not sure, you can ask your local tax office. You may also be eligible if either you or your spouse works overseas for the UK Government.

If you have a Stakeholder Pension with Norwich Union, you need to tell us if:

• You stop being resident in the UK
• You stop having earnings subject to UK income tax
• You or your spouse stop working for the UK Government overseas
• You move abroad or start working abroad as this may affect what you can pay.

If your employer has a company pension scheme that you are able to join, you should always consider your employer's scheme first and discuss this with a financial adviser.

What would you get from the State Pension?

If you're single, you'd receive just £90.70 a week from the Basic State Pension in the current tax year (2008/09), or as a married couple you'd get a total of £145.05 per week.

If you are, or have been, employed you may also qualify for a combination of the State Earnings Related Pension Scheme (SERPS) and the State Second Pension (S2P). This isn't available to those who have been self-employed for all their working life.

The actual amount of Basic State Pension, SERPS and S2P you receive will depend on the National Insurance contributions you've paid during your working life. However, there's likely to be a large gap between your income before retirement and the State Pension you receive when you retire.

The good news is that starting a Stakeholder Pension with Norwich Union will not affect your entitlement to the Basic State Pension.

How much can you invest?

You can start your Norwich Union Stakeholder Pension with as little as £20, which can be paid by your employer if you have one. You can also start a Stakeholder Pension plan if you're not employed and don't have any earnings. You can pay as much as you want to into your plan up to a maximum of £3,600 a year (inclusive of tax relief) or 100% of your UK taxable earnings if greater.

There is an overall limit set by HM Revenue & Customs called the Annual Allowance, which is £235,000 in the tax year 2008/09, rising to £255,000 by 2010/11. If you or your employer make payments above the Annual Allowance, you may be subject to a tax charge. The Annual Allowance doesn't apply in the tax year that all benefits are taken under the plan.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

You can make regular monthly or yearly payments into your Norwich Union Stakeholder Pension. This is normally done by direct debit from your bank or building society account. You can also make one-off payments at any time, which could include money you've moved from another pension scheme.

You can increase or reduce the amount you pay at any time, without paying a penalty fee. If you want to stop paying altogether (for example, if you've left work to raise a family), you can stop and restart your payments whenever you like, although this will affect how the fund grows. You can also choose to increase your payments every year in line with National Average Earnings. The minimum increase is 3% and the maximum is 15% of the amount you pay regularly by direct debit.

What are the tax rules?

On 6 April 2006, HM Revenue & Customs (HMRC) introduced new allowances governing the amount of money you can build up in all your pension plans whilst still benefiting from tax relief:

• Tax relief
  There's no limit on the amount that you can pay into your Stakeholder Pension plan and any other pension plans you have, but you won't get tax relief on payments over a certain amount. HMRC allows tax relief on your personal payments to all your plans up to £3,600 a year or 100% of your UK taxable earnings if greater. Norwich Union won't accept payments from you that don't qualify for tax relief.

• Annual Allowance
  The Annual Allowance is an overall limit, which is £235,000 in the tax year 2008/09, rising to £255,000 by the 2010/11 tax year. If total payments from you and your employer to all your pension plans are above the Annual Allowance, you may be subject to a tax charge. The Annual Allowance doesn't apply in the tax year that all benefits are taken under the plan.

• Lifetime Allowance
  The Lifetime Allowance is a limit on the amount of money you can build up in all your pension plans without losing tax advantages. Any amount above this allowance will be subject to a tax charge when benefits are paid. The Lifetime Allowance is £1,650,000 in the tax year 2008/09, rising to £1,800,000 by the 2010/11 tax year.

  As well as the amount you're currently building up in pension plans, the Lifetime Allowance also takes into account the value of any pensions already being paid to you and any tax-free lump sums you've received. If you already have pension funds that exceed the Lifetime Allowance or you think may exceed it in future, you should talk to a financial adviser before taking out a Stakeholder Pension.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

How do you get tax relief?

You make your payments, less an amount equal to the basic rate of income tax. Norwich Union then claims this back from HM Revenue & Customs (HMRC) on your behalf and adds it to your plan, together with the amount you have paid.

This is often referred to as making payments net of basic rate tax. For example, if basic tax is 20% and you pay £80 into your plan, HMRC will add £20 to this, so the total invested is £100. This is known as basic rate tax relief and you will get this, even if you don't pay tax.

If you're a higher rate taxpayer, the payments made into your plan will only be increased by basic rate tax relief, but you will be able to claim higher rate tax relief on your annual self-assessment tax return.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

What choices will you have when you take your retirement benefits?

When you retire, you can use the whole of your fund to buy an annuity or take part of the fund as a tax-free lump sum and use the rest to buy a smaller annuity. Normally, you can have up to a quarter (25%) of your fund paid to you as a tax-free lump sum. If you start taking benefits after you're 75 years of age, you won't be allowed to take a tax-free lump sum - you'll have to use your whole fund to provide income.

You can choose from a number of different types of pension income, such as an annuity that increases every year or one that continues to be paid to your spouse after your death. Tax will be deducted from your pension income before it's paid to you. If you don't pay income tax, you can arrange for your pension income to be paid without tax being deducted.

You don't have to take your pension income from Norwich Union - you can choose to move your fund to another provider when you retire. When you approach your retirement date, we'll give you details of your choices and tell you how much of your Lifetime Allowance you've used. If you take benefits above the Lifetime Allowance there may be a tax charge - we'll tell you more about this if it applies to you.

Any statement about tax liability is based on our understanding of current law and tax practice. Future changes in law and tax practice could affect how much your plan is worth and your tax liability. Your plan could also be affected by changes in your personal financial circumstances.

What if you have an existing pension?

If you've had more than one employer during your working life, then you may have built up benefits in several company pension schemes. You may also have taken out a private pension of your own. If so, you can carry on paying into your private pension as well as taking out a Stakeholder Pension Plan.

In most cases, you can also move the money that you've built up in other pension schemes into a Norwich Union Stakeholder Pension, now or in the future.

Bear in mind that not all pension schemes work in the same way, so moving any existing pension funds into your new plan may not always be the best thing for your own personal circumstances. We recommend that you talk to a financial adviser before deciding to move an existing pension.

What are fund units?

Unit-linked investment funds are divided up into equal parts called units. Your investment will buy a certain number of units in the fund and a unit's price will be dependant on the performance of the fund. Each of our funds is given a risk/return rating, ranging from 1 (low) to 5 (high) - you can find out more about the risks associated with investing.

Bear in mind that all investments can go down in value as well as up and the amount of investment return you get isn't guaranteed.

What are the charges?

The maximum charge is just 1% of the fund value each year, or just 0.9% if you apply online. This makes a Norwich Union Stakeholder Pension even better value for money, as these low charges mean that more of your money is working for you from day one. The charge covers the cost of plan administration and looking after your investments.

If your fund is more than £50,000, we will refund some of the charge each month. The amount of refund increases as your fund grows - up to a maximum of 0.1% of the value of the fund each year. The large fund rebate is credited back to your pension fund directly in the form of extra units. Find out more about the large fund rebate in our member guide (PDF).

Fund value	Annual refund %
Less than £50,000	0.00%
£50,000 - £99,999.99	0.05%
£100,000 or above	0.10%

What happens if you're ill?

Long-term illness or disability could mean that you can no longer afford to make payments to your pension plan. To guard against this and protect the future value of your pension, you can choose the Your Pension Protector Plan from Norwich Union.

This means that Norwich Union will take over the regular payments that you would normally make to your pension if you're unable to work for more than six months due to sickness or ill health during the term of your plan. You can make a claim if you're unable to perform at least three listed capabilities or if you suffer from a serious condition as specified in the plan.

Norwich Union will carry on making the pension payments for you until you recover, the plan term ends or you die, whichever happens first. For more information about Your Pension Protector, speak to a financial adviser.

What happens if you die before you retire?

If you die before you start receiving your pension, we'll normally pay the full value of your fund as a lump sum. If your plan contains protected rights funds, these must be used to provide an income for your surviving widow, widower or civil partner.

You can specify the person(s) you would like to receive all or part of the lump sum, and this will help us to pay out more quickly. You can change the people named at any time by writing to us. Your wishes are not binding, but we will bear them in mind when making the payment.

If you prefer, you may be able to set up your own individual trust, so that we pay any lump sums to trustees appointed by you. We can provide you with a trust form or you can use your own - we'll need to see the original or a certified copy of the completed trust. We recommend that you see a solicitor before setting up a trust.

Any lump sum paid on death will count towards your Lifetime Allowance. However, instead of your fund being paid out as a lump sum, it can be used to give your dependants an income for as long as they live - and any benefits paid in this way will not count towards your Lifetime Allowance.

If you're 75 years of age or over and you die before you start receiving your pension, we will not be able to pay any remaining fund as a lump sum. The fund will normally be used to provide an income for your spouse or dependants. If you have no dependants, the fund will be paid as a lump sum to a charity of your choice. If you don't make a choice, we'll choose the charity.

You'll find more information about the Lifetime Allowance in the FAQ ‘What are the tax rules?’.

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It's easy to get an instant quote and apply online for a Norwich Union Stakeholder Pension Plan

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Or call us on 0800 068 6800* Any advice given will relate only to the products sold or marketed by Norwich Union.

For more information, a quote or a helping hand with your application, just give us a call.

* Lines are open Monday to Friday 8am - 9pm, Saturday 9am - 5pm and Sunday 10am - 4pm. Calls may be recorded and/or monitored.

WC03033 09/2008