Questions and answers
Starting your pension
Important note: The answers here are based on pensions legislation and known future changes as at November 2014. Remember the Government has announced proposals to simplify the tax rules from April 2015 to allow unrestricted flexible access to your pension savings. Also they are consulting on possible further changes to the rules and tax rates used here.
Who can take out a Virgin Pension?
You can save in a Virgin Pension if you are employed, self-employed or not employed. You just need to be:
- 16 or over.
- A UK resident.
- Happy to leave your money invested until you're 55 or older (57 from 2028).
You don't need to stop working to take your pension.
How do I apply?
Applying is simple and only takes a few minutes online. To get started, click here
How much can I pay in?
You can pay in anything from £1 upwards. You get tax relief on everything you put away, up to 100% of your annual earnings (subject to an upper annual allowance of £40,000). If you are able to save more than £40,000 a year (from 2014/15), you don’t get tax relief on payments above that, in fact you will be taxed on them. If you have unused annual allowance from previous tax years, you may be able to pay in more than this. Please see below.
From April 2015, if you have used the new options to flexibly access your pension savings after 55 (57 after 2028), your annual allowance will be limited to £10,000 for further payments into your Virgin Money pension.
If you are a non-taxpayer, you will receive tax relief on contributions up to a maximum of £3,600 (gross) per tax year. Tax is dependent on your individual circumstances and may change in the future.
Can I pay in more than £40,000 in one year?
From 6 April 2014 the annual allowance reduced to £40,000, for the tax years 3 years before this it was £50,000. So any contributions above these amounts will normally be taxed.
From April 2015, if you have used the new options to flexibly access your pension savings after 55 (57 after 2028), your annual allowance will be limited to £10,000 for further payments into your Virgin Money pension. You won't be able to use any carry forward of unused annual allowance.
Don't forget this includes any contributions from an employer and increases in value of any other pension savings you may have.
You may be able to avoid being taxed by carrying forward any unused annual allowance from previous tax years. However, there are some rules around this, as you can only go back 3 tax years and you must have been a registered member of the scheme in the tax year you are carrying forward from.
If you’d like to find out more about this, check the latest information on the HM Revenue & Customs website and seek advice from a tax specialist or financial adviser before investing – to ensure you don’t incur tax charges you weren’t expecting.
Can my employer contribute?
Yes, their payments would form part of your total contribution limits.
If you'd like your employer to contribute, just let us know and we'll send you a form making it easy for them to do.
Can I save in other pensions too?
Yes, you are allowed to save in as many pensions as you like. If you already have a pension which you could make further contributions to, you should speak to an Independent Financial Adviser.
Can I transfer other pensions to Virgin Money?
Yes, you can transfer other pensions into a Virgin Pension, however, you would need to make sure it was the right thing for you to do. If you would like more information please contact us.
Can I start a pension if I plan to retire within five years?
Yes, you can. But if you haven’t started a pension yet and are hoping to retire within five years time, we strongly recommend you seek independent financial advice, so you can decide on the best options available to you at this time.
Can I pick which pension funds to invest in?
In the early days, our focus is on growing your money in our Pension Growth Fund. It works by locking your money into the long-term potential of the UK stock market, using an investment approach called ‘index-tracking’.
As you near retirement, looking after the money you’ve invested becomes the priority, so we gradually move your money into our lowest risk fund, the Pension Income Protector Fund.
This simple approach is sometimes referred to as ‘lifestyling’. We automatically apply our lifestyling approach to your Personal Pension.
If you would prefer to choose yourself where your money is invested, you can pick from our range of five funds instead.
Read about how our funds compare
Remember, the value of your investments can go down as well as up and you may get back less than you invest. You should also remember that past performance is not a reliable guide to the future.
Are there any risks I need to know about?
Investing in stock market shares is not without its risks. They can rise significantly in value over many years, go into periods of decline, or fall suddenly in value, with no guarantees you will get back the full amount you invest.
The key point to remember is that saving into a pension is a long term investment, and the longer you remain invested in the stock market the better you tend to do.
Under the current rules you can't access your pension benefits before the age of 55 (57 from 2028), even if you retire from work earlier. Also, the amount of pension income provided by your retirement fund will depend on a number of factors, including investment returns, interest and annuity rates when you take your pension benefits.
How do I claim the tax relief?
Whether you are employed, self-employed or not employed, we claim basic rate tax relief for you and invest it in your pension.
If you pay income tax at the higher rate (or additional rate that applies for those with an annual income above £150,000) you can claim any extra tax relief you are due from the HMRC in your annual tax return. Tax is dependent on your individual circumstances and may change in the future.
Changes to your circumstances
What happens if I change jobs?
The first thing is to find out if your new employer will Auto-Enrol you into a qualifying scheme or if they don’t currently, do they offer a company pension, and whether they contribute to it. If so, you should join, so you don't miss out on any payments they're offering. You can also keep your Virgin Pension, and keep paying into it if you wish.
If you become self-employed or your new employer doesn't offer a pension scheme, it's a good idea to keep paying into your Virgin Pension so your retirement savings stay on track.
Whatever you choose to do, please let us know if you've changed jobs.
What happens if I'm off work?
If you're off work but are still being paid (e.g. paid maternity leave or sick leave), you can continue to pay into your pension and you'll still receive tax relief on your payments (on up to 100% of your annual earnings and also subject to an upper annual allowance of £40,000). If your employer is paying into your pension, you'll need to check with them whether they'll continue to contribute while you're off work.
If you have time away from paid work, remember you can stop payments into your Virgin Pension if you need to. You can start saving again whenever you wish. If you do make payments into your pension you'll still receive tax relief on up to £2,880 of payments each tax year, even if you have no earnings for that tax year. You can pay in more than that if you wish but you won't receive tax relief on the extra amount. Tax is dependent on your individual circumstances and may change in the future.
What happens if I stop work altogether?
Even if you're not earning you can still pay into your Virgin Pension and receive tax relief on up to £2,880 of payments each tax year. You can pay in more than that if you wish but you won't receive tax relief on the extra amount. Tax is dependent on your individual circumstances and may change in the future.
If you can no longer spare the money you can stop your payments into your pension. You can start saving again whenever you're ready.
Please remember, stopping or reducing your payments to your pension plan may reduce the amount you get back from your pension.
What happens to my savings if I die before flexibly accessing my savings?
When you took out your Virgin Pension, you may have named one or more beneficiaries. Beneficiaries are people you nominate to receive your pension savings when you die.
If you die before you are 75
If you die before the age of 75, your beneficiaries will pay no income tax on the amounts they inherit. They will then either choose to receive a lump sum, or will be able to draw down income from the pension savings.
If you die after you are 75
At the moment, any pension savings not already withdrawn are subject to a 55% tax charge payable by your estate, your executors or a personal representative. From 6 April 2015, this tax charge will be lowered and beneficiaries will have the following options:
Take the whole fund as cash in one go
With this option, the whole pension fund is subject to 45% tax (although the Government has proposed that from 2016/17, it should be taxed at the beneficiaries’ marginal rate of tax).
Access the fund flexibly
Your beneficiaries will be able to access the pension funds flexibly at any age, and pay tax at their marginal rate.
When can I take my benefits?
The earliest you can currently take your pension is your 55th birthday (57th birthday from 2028). You don't have to retire or stop working to take your benefits.
Where can I find out more about my retirement options?
From two to five years out, start thinking about your options and planning for the choices you’ll need to make. You can use sites like the Money Advice Service to do your research in the run-up to your retirement.
When you're ready, remember to shop around to make the most of your pension 'pot'. You may also want to read about the changes the Government announced in the 2014 Budget.
If you would like help from a tied financial adviser, you can speak to a Legal & General Financial Consultant in your local Virgin Money Store. All you need to do is email email@example.com with your name, address and phone number and Legal & General will contact you to arrange an appointment. Please note, Legal & General will charge for this service.
If you are unsure and would like to seek independent financial advice, please visit www.unbiased.co.uk to find a financial adviser in your area.
When I take my pension benefits can I take a lump sum?
- You can normally take up to a quarter of your savings as a tax-free cash lump sum.
- If the total amount of your pension wealth is £30,000 or less, you can take up to a quarter as a tax-free cash lump sum and the remainder as a lump sum on which you pay tax at your marginal rate of tax.
- Up to three small pension pots of £10,000 or less, regardless of total pension wealth, can be taken as lump sums.
Will I pay tax on the lump sum?
Apart from the tax free cash lump sum, you will pay income tax on these lump sums at your marginal rate of tax.
What are my options if I am over the lump sum limits?
If you are over these limits and your individual circumstances mean your fund and/or income is large enough to meet HMRC limits allowing you to use drawdown, you could choose to leave your funds invested whilst taking an income. Otherwise, you might want to purchase a secure income in retirement through an annuity.
Will the recent government pension reform affect my pension in the future?
Yes, there will be a number of further changes that will come into effect from April 2015:
- The tax rules change allowing people to access their defined contribution (DC) pension savings as they wish after the age of 55 (57 from 2028).
- Under the new arrangements, drawdown of pension income will be taxed at your marginal rate of tax that depends on your individual circumstances, rather than the current flat rate of 55% for unauthorised payments.
- The 25% tax-free pension lump sum will continue to be available.
- The new flexibility means you can still purchase an annuity if it suits you, extract all of your pension savings in a lump sum, or keep your pension invested and access it over time or any combination of these options that you want to choose.
- To help you make the right decision, from April 2015 everyone approaching retirement with a defined contribution pension will be offered free and impartial guidance on the range of options available to them.
Tell me more about the 2014 Budget