What is a Pension account?
A pension account is a tax-efficient way of saving for your retirement. The Netwealth Personal Pension account enables you choose what to contribute and then delegate management of the investments inside the account to Netwealth.
How much can I add to my pension?
There is no limit on contributions but if your total contributions in respect of your personal contributions, any income tax relief from the government and contributions paid by your employer exceed the annual allowance, the government will apply an income tax charge. In the tax year 2020/21 the annual allowance is £40,000 unless you earn over £240,000, in which case a taper will apply and the allowance will be reduced.
Pensions also have a lifetime allowance which is currently £1,030,000. If the total of all your pension savings exceeds the lifetime allowance an additional income tax charge applies when you withdraw.
Who can pay contributions into my Netwealth Personal Pension?
You or your employer or another third party (for example a parent or spouse) can pay contributions into your Netwealth Personal Pension on your behalf.
Who can qualify?
Like all pensions, a Netwealth Personal Pension can be held and invested in by any UK resident who is over the age of 18 and under the age of 75.
What tax relief will I get on my contributions?
The Netwealth Personal Pension is a HM Revenue & Customs registered pension scheme, and as such benefits from the normal tax relief available to pensions. You can receive tax relief on contributions up to the value of your earnings, or £3,600, whichever is the higher. We will claim basic rate tax relief on your behalf from HMRC and this can then be added to the account. If you pay higher or additional rate tax, you can claim back any additional tax relief through your self-assessment tax return.
Contributions paid directly into your pension by your employer are paid without income tax being deducted, so will not receive any income tax relief.
How are my investments taxed within a pension account?
The investments in your pension account will be free of income tax and can be sold without incurring capital gains tax. However, any withdrawals will be subject to income tax at the time of withdrawal.
Having a pension with Netwealth
As part of opening a Netwealth Personal Pension you are appointing Intelligent Money as your pension trustee. After signing up with Netwealth, we will arrange for your pension to be opened with Intelligent Money and you will be provided with an Intelligent Money Welcome Pack in your Document Store. Netwealth will also open your pension’s corresponding investment account with SEI as administrator and custodian.
Who are Intelligent Money?
Intelligent Money is the UK’s largest intermediary-only pension provider. Established in 2002, authorised and regulated by the FCA, they offer a pension product that is designed for use by third party Investment Managers and their advanced technology capabilities make them an ideal fit for the Netwealth Personal Pension.
More can be found on their website https://www.intelligentmoney.com/about-us
Paying into your Netwealth Personal Pension
All monies paid into the Netwealth Personal Pension need to be received in the first instance by the pension trustee.
Intelligent Money will process your tax reclaims with HMRC and will notify us when that additional money has been credited to your pension account.
Can I withdraw money from my Netwealth Personal Pension?
You can normally start drawing retirement benefits from age 55 even if you are still working.
When you come to take retirement benefits, if the total of all your pension funds exceeds a certain limit (the lifetime allowance) you may have to pay an additional tax charge on the excess (the lifetime allowance charge).
What types of withdrawals can I make?
You can take your retirement benefits in a number of different ways:
Flexi-access drawdown: You can take a tax free lump sum (known as a Pension Commencement Lump Sum or PCLS) of up to 25% of your pension fund. You can then keep the rest of your pension invested with Netwealth and take a regular income from the remaining pension fund. The income you draw will be subject to tax at your marginal rate.
Uncrystallised Funds Pension Lump Sum (UFPLS): You can take lump sums (called Uncrystallised Funds Pension Lump Sums or UFPLS) out of your pension on an ad-hoc basis. If you do this, 25% of the UFPLS payment will be tax free and the remaining 75% will be subject to tax at your marginal rate.
Annuity: You can take a tax free lump sum (known as a Pension Commencement Lump Sum or PCLS) of up to 25% of your pension fund. You can then use some or all of your remaining pension to purchase an annuity from an insurance company.
What if I am already retired?
If you have already retired, you are still able to contribute to a personal pension. You have a contribution allowance of up to £3,600 gross in a tax year, even if you have stopped working, or are drawing a pension income already. You will still receive basic rate tax relief on contributions up to this limit. This means that if you put £2,880 into the pension the remaining, £720 is added in basic rate tax relief resulting in a full contribution of £3,600.