The Prudential Stakeholder Pension Scheme in depth

Read on for more details about the Prudential Stakeholder Pension Scheme

Easy start up process

To help you get started we can provide you with:

• a letter to help you consult with your employees about choosing the scheme,
• a comprehensive pack of information to help you communicate the importance of a stakeholder pension scheme to your employees in the clearest possible way,
• access to our informative and regularly updated website.

Charges

Charges will depend on the funds your employees have chosen. Prudential currently maintains a maximum annual charge of 1% p.a. Charges may vary in the future. If you or your employees stop making payments our charges will continue to be taken from their plan.

Flexible payment options

• You and your employees can pay on a weekly, four-weekly, monthly, yearly or one-off basis.
• You and your employees can increase, decrease, stop or restart payments at any time - absolutely free.
• Payments can begin from a £20 regular or one-off payment.
• The government limits the amount that can be contributed every year before incurring tax penalties. This is called the 'Annual Allowance'. The level of Annual Allowance is currently £50,000. If you exceed the Annual Allowance, a tax charge of up to 50% of the excess amount will be payable.
  However, any unused allowance from 'pension input periods' ending in the previous 3 tax years, may be carried forward to increase your Annual Allowance for the current year (provided you have used the current annual allowance first and you were a member of a registered pension plan).
• Your Annual Allowance includes:
  - any contributions you, your employer or anyone else makes to all your money purchase pension plans
  - any increase in the value of benefits under your main scheme and any other salary related pension schemes, also known as Final Salary, Defined Benefit or Career Average schemes Together, these are known as your 'pension inputs'. Your pension inputs are assessed against the Annual Allowance for the tax year in which the 'pension input period' ends. For information on your pension input period please contact your scheme administrator if you are affected by this limit you may wish to contact a Financial Adviser, for which you may be charged.
• Tax relief will normally apply to the contributions up to £3,600 or 100% of their earnings, if greater.

If the value across all the employees pension funds exceeds the Lifetime Allowance at the time they take the benefits, a tax penalty will be payable on the excess amount. The limit for 2011/12 is £1.8 million and with effect from 6 April 2012 will reduce to £1.5 million. The government has introduced protection, which the employee will need to apply for by 5 April 2012 if they expect the value of all their pensions to be over £1.5 at the time they take the benefits. If employees are affected by this limit they may wish to contact a Financial Adviser, for which they may be charged.

Payment options for employers

Payment options for employees

We offer your employees the following payment options:

• Direct Debit. This is an easy way for your employees to pay, and if you do not intend to contribute to your employees' stakeholder pensions it might be the simplest solution for you.
• Straight from their pay (payroll deduction). If your employees ask for this, you must enable them to do it. We recognise this is one of the most complex parts of setting up your stakeholder scheme so if you would prefer to call us, we will explain everything.

Tax relief

Employers - payments are a deductible business expense. Your tax advisers will have full details.

Employees - Since 6 April 2008 the basic rate of tax is 20%. This means that for every £1 the employee pays into the plan HMRC pays an extra 25p into their plan.

If the employee pays tax above the basic rate there may be further tax relief.

This information is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, as at November 2011. These tax rules could change in the future without notice.

The impact of taxation (and any tax relief) depends on individual circumstances.

What happens at retirement

The government currently allows people to start taking their benefits from the age of 55, even if you are still working. You may be able to start taking your benefits earlier if you're in ill health. Under the terms of this contract you are currently required to take your benefits by age 75.

Life cover

If the employer is making regular payments the employee can take out life cover which will increase the amount the plan pays out if they die before they have started taking retirement benefits.

• There are no limits on the amount of life cover that an employee can have. However, the amount they pay towards life cover and the lump sum paid out on death are subject to the Annual Allowance and Lifetime Allowance rules.
• When the employee applies for life cover, they will have to answer some questions about their health, and we may also contact the employee's doctor for a report. If we ask the employee to have a medical examination, we'll pay for it.
• The full cost of any life cover the employee may choose will be deducted from the payments made to the plan by you, the employer. This cost will normally increase each year as the the employee gets older. This may have the effect of reducing the payments made towards the employee's retirement benefits. The employee should regularly review payments into their plan.
• If regular payments into the plan stop or are suspended, the life cover will end. If regular payments are reduced, the life cover may also have to be reduced.

Choice of funds

Prudential's fund management business in the UK is conducted under the umbrella of Prudential M&G. Prudential M&G pride themselves on their investment heritage and have been focusing on investment management since 1931. Today they look after investments for more than 317,000 investors and over £199 billion worth of Prudential's investments (as at 31st March 2011). They are constantly developing new products and offer real opportunities for outstanding long-term returns.

Employees can choose the funds in which they wish to invest from. The Lifestyle option is our default fund* so if they don't choose, we will invest their payments in this. For more information about the funds available with the Prudential Stakeholder Pension Scheme, look at the Prudential Fund Brochure.

Your employees can switch funds by phone, by post or by the web - absolutely free.

The value of an investment may go down as well as up and a member's fund value in future may be less than the payments they have made.

* This fund doesn't represent a recommendation on behalf of Prudential and you should consider and choose funds to suit your needs. If you are unsure as to the suitability of this product or fund choice, please seek financial advice. Please note you may be charged for this advice.