Changing the payments into your company pension plan
If you’re thinking about changing the amount you pay into your company pension plan, we’ll be happy to help. It’s important to understand all your options, and the effect of any changes you make. There are a few things you should think about before you make any decisions.
If you have any questions once you’ve read this summary, or need any help understanding your options, either speak to your HR department or call us on 0808 234 3030, or +44 178 644 8844 if you’re calling from abroad.
How a company pension plan works
There’s a variety of pension plans available. They’re designed to provide a tax-efficient way of helping you to build up a pension pot to provide for your retirement.
Payments might be made into your plan by you, your employer, or both of you. Pension plans offer tax relief on your payments, subject to certain limits.
Your money will be invested in funds looked after by fund managers, who try to achieve the best returns possible. Any growth in your plan will be largely tax-free too. A charge is taken for managing your plan. Details of your fund choices and charges can be found in your annual statement. If you don’t have your annual statement or you’ve lost it, you can request a new one. Just call us.
In most cases, when you take your benefits, you can take up to 25% of your plan tax-free and the remainder will be taxable.
Tax rules are complex and require careful consideration and the impact will depend on your individual circumstances. Taxation, legislation and HM Revenue & Customs practice is liable to change without notice. You may want to seek advice.
Your options will vary, depending on your plan and the choices you’ve made so far. We’ll explain them further if you call us.
You may be able to vary your regular payments at any time, or you could consider making additional single payments from time to time.
Alternatively, you may also be able to take a temporary break from making payments or stop payments permanently.
Things to consider before making your decision
There are a few things you should think about before making changes to your payments:
- Varying your payments will affect the amount available when you take your benefits.
- If your employer also makes payments these might be affected. Your employer should be able to help you if this is the case.
- Charges applied to your plan may change.
- There could be an impact on any state or salary related benefits that you may be entitled to.
- The amount of tax relief you get is related to the amount you pay. If you reduce payments you may lose out on tax relief.
- You could exceed your annual or lifetime allowance, resulting in a tax charge.
- Any additional benefits, like life cover, could be affected.
Depending on your plan and how close you are to taking your benefits, it may not be possible to make increased payments to the With-Profits Fund.
It’s important to remember that the value of investments can go down as well as up and you could get back less than you’ve paid in.
You should keep track of your plan through your annual benefit statement.
Protecting yourself from pension scams
According to Action Fraud, the UK’s fraud and internet crime reporting centre, an estimated £1.2bn is lost to scams every year. So if you’re thinking of reinvesting the money from your plan, take a minute to find out more, and stay ahead of the scammers. There is also some very useful information available from The Pensions Regulator.
What to do now
If you have any questions or need more help understanding your options, you can either speak to your HR department, or contact us on 0808 234 3030 or +44 178 644 8844 if you’re calling from abroad. We can’t make your decision for you, but we’ll be happy to help you understand your options. We’re here 8am - 6pm Monday to Friday and happy to help in any way we can. You’ll need your plan number to hand when you call.
Alternatively, speak with a financial adviser - if you don’t have one, you can get details of financial advisers from pru.co.uk and selecting ‘contact a financial adviser’. You may be charged for their services.