Frequently asked questions

1: What is the Self-Directed Cofunds Pension Account? Is it the same as the Chelsea SIPP?

Suffolk Life working as the pension trustees and provider for the SIPP have teamed up with Cofunds (who are providing the platform in which to invest) to offer the Cofunds Pension Account.

This is a low-cost, flexible pension with access to all the funds on the Chelsea FundStore (over 2,500 funds). We have removed the initial fund charges for all funds and, in addition, there is no fee to switch between funds and no set-up charge for the SIPP wrapper for clients of Chelsea.

This pension is a fund-based pension suitable for clients wanting to simply hold funds and avoid the higher costs associated with traditional SIPPs. If you have collected pensions over the years you can now consolidate them all in one place, via the Chelsea FundStore, meaning that your pensions would be easier to manage.

2: What are the charges?

Chelsea has always been renowned for its high level of service and competitive charging. To continue this, opening a SIPP via us, remains the competitive way to save.

  • 0% set-up charge
  • 0% initial charge on funds
  • Competitive service and platform charge
  • Free telephone dealing
  • Free transfer in
  • Free switching
  • Low-cost drawdown option
  • Twice-yearly statement with expert research commentary
  • Pre and post sale illustration
  • 20% tax relief automatically reclaimed by Suffolk Life (based on relevant earnings)
  • Access to tax-free cash from 55
  • 0% charge processing probate
  • Dedicated Chelsea pension administrator

Investing in a pension has the same charges as if you were to open an ISA with us:

Up to £250,000 held with Chelsea
Cofunds' platform fee 0.20%
Chelsea's fee 0.40%

Amounts between £250,000 and £500,000
Cofunds' platform fee 0.20%
Chelsea's fee 0.35%

Amounts between £500,000 and £1m
Cofunds' platform fee 0.20%
Chelsea's fee 0.30%

Amounts between £1m and £2m
Cofunds' platform fee 0.15%
Chelsea's fee 0.25%

Amounts over £2m
Cofunds' platform fee 0.15%
Chelsea's fee 0%

These costs are based on the whole portfolio, so all of your assets contribute towards the total, and are not product specific (for example ISA, SIPP). On the first £250,000 invested you pay 0.6%, then for the next £250,000 you pay 0.55% and so on.

Charges for going into drawdown

4: How can regular contributions be made?

To set up a personal regular contribution you will need to complete a regular investment instruction, a regular contribution request and a direct debit instruction. Single contributions can be funded from the Cofunds Cash Account or made by cheque. Please note that cheques must be made payable to Cofunds Ltd.

If a third party is making the payments we may require proof of identity.

If your employer is making the payment we will require articles of association and an employer contribution authority to be completed.

If you have a regular investment instruction in place, your Trading Account will be checked on the 11th working day of every month. If you have enough money to cover the agreed amount, it will be invested into your pension within the funds specified within the instruction. Please be aware that the direct debit is set to take the money from your bank account on the 1st working day of the month.

Tax reclaim (if applicable) will be added to your account between 6 and 11 weeks following the investment.

5: Who can contribute to my pension?

  • Employer
  • Employee
  • Another third party

Any contribution (including employer and third party) will affect the annual allowance of the person whose pension is being paid into. This is limited to 100% of relevant earnings (up to £40,000, as long as MPAA has not been triggered). If you are a higher rate or additional rate tax payer, see annual allowance. This limit is across all pension policies that the client holds. Tax relief is not given on employer contributions.

We will require Articles of Association for the company, and may require details of the Directors and majority shareholders.

Money purchase annual allowance

HMRC introduced the money purchase annual allowance (MPAA) to ensure that there are no potential recycling issues with individuals claiming tax relief on any new contributions made, having just taken their benefits. Once you take income from your pension you will be subject to a reduced money purchase annual allowance. As of April 2017 this allowance is £4,000.

6: As an employer, how would I make contributions to an employee's personal pension scheme?

If your employee has a pension via Chelsea FundStore, simply download the employer contribution form, complete, and return it to us here in the office. You can either make a one-off payment (cheques should be made payable to Cofunds Ltd) or you can make a regular contribution, by completing the direct debit mandate.

We will also require the Articles of Association for the company and may require details of the Directors and majority shareholders.

If, however, they do not already have a Chelsea SIPP simply download an application form, ask them to complete and return it to us in the office, along with the employer contribution form.

You can then claim tax relief through your accountant with regards to the payment. This will not count as taxable pay, and you will not need to deduct tax or N.I. contributions from the payment.

Please be aware that the Self-Directed Cofunds Pension Account is not a qualifying scheme for automatic enrolment.

7: What is the maximum lifetime allowance?

As of 6th April 2016, the lifetime allowance was reduced to £1m, increasing with CPI each year. This effectively means you can invest £1,030,000 in your lifetime.

8: What is the maximum I can invest into my pension?

The annual allowance, set by the government, is currently £40,000 per tax year. This limit stipulates how much tax-free money you can invest in your pension, over the given tax year. On this amount, you will receive tax relief. Please be aware that this allowance is based on contributions made by both you, your employer, and any other third party.

You will only receive tax relief on your relevant earnings, up to the annual allowance. Please note that you may be able to carry forward unused allowance.

If you are a higher rate or additional rate tax payer, see annual allowance.

Any payments made by cheque must be made payable to Cofunds Ltd.

Money purchase annual allowance

HMRC introduced the money purchase annual allowance (MPAA) to ensure that there are no potential recycling issues with individuals claiming tax relief on any new contributions made, having just taken their benefits. Once you take income from your pension you will be subject to a reduced money purchase annual allowance. As of April 2017 this allowance is £4,000.

9: What is tax relief?

Tax relief is what the government contributes to your pension, following a contribution, and is based on 20%.

Personal contributions into a pension plan receive tax relief at your highest rate of income tax. Basic-rate tax relief is added on to what you pay into your plan, and the pension provider will add this 6-11 weeks after a personal contribution is made. Higher and additional-rate tax relief can be claimed in addition to basic-rate tax relief through your tax return, if applicable. See below for details.

If you are a higher rate or additional rate tax payer, see annual allowance.

R0128 CFS Tax Relief Chart

10: How will tax relief be shown on my account?

Tax relief on contributions is not pre-funded, it will be credited separately to the Trading Account on receipt for both single and regular personal contributions. There will be a delay in this being shown in your account, of around 6-11 weeks. You can set up a regular investment instruction to help minimise any administration on the pension. Please contact us in the office on 020 7384 7300 or info@chelseafs.co.uk if you are interested in setting one of these up.

11: Can I transfer to the Cofunds SIPP, via Chelsea FundStore?

Yes, simply download a transfer form, complete and return it to us here in the office.

If you are transferring a pension, you will need to contact your current pension provider(s) and inform them that you wish to make a transfer of the funds and ask them to send you a transfer discharge form. Please be aware of any exit charges that may be levied by your existing provider and any guarantees you may be giving up. These could include tax-free cash, protected retirement age, etc. For more details see page 10 and 11 of the Product Guide.

12: Do I have to transfer my pension as cash?

No. Cofunds also facilitate the re-registration of collective investments held within another pension, where the fund is available on the Chelsea FundStore, powered by Cofunds. Due to regulatory changes, from 6th April 2014, assets that are re-registered onto the Chelsea FundStore,  that are in commission-included share class funds will be converted into the equivalent commission-free share class. If there is no equivalent commission-free share class, the application will be referred.

You must provide the relevant discharge forms and details of the assets within the applications, as this can cause delays.

18: How will charges be taken?

Chelsea's service charge and Cofunds' platform charge will be taken on a monthly basis from your Trading Account.

To fund the Trading Account Cofunds will sell down units from your holdings to provide the money required. Alternatively, you can fund the Trading Account by sending us a cheque, made payable to Cofunds Ltd. Please be aware that this will be classed as a contribution to your pension.

The fund managers annual management charge (AMC) will be taken at source.

19: Can I deal on and view my pension online?

You can purchase and switch online. Adding money into the account must be processed via direct debit mandate, BACs, or cheque, but general maintenance of your account can be done using our online service.

Please note that cheques must be made payable to Cofunds Ltd and if you would like to make a BACs payment, please contact us in the office.

21: What is a regular investment instruction (RII)?

An RII is an instruction that you can set up to invest a fixed amount on a monthly basis into your pension from the Trading Account.

If you have an RII in place, your Trading Account will be checked on the 11th working day of every month and, if you have enough money to cover the agreed amount, it will be invested into your pension within the funds specified within the instruction.

Please be aware that the direct debit is set to take the money from your bank account on the 1st working day of the month. So the money will sit in the Trading Account, until the tax reclaim is received. Download an RII form here.

22: What is drawdown?

A drawdown pension allows you to take income from your pension pot whilst the pot remains invested. There are three types of drawdown:

  1. capped drawdown - only available if set up before 6th April 2015
  2. flexi-access
  3. uncrystallised funds pension lump sum (UFPLS) - not available through Chelsea

23: What is flexi-access drawdown?

Flexi­-access drawdown is a new drawdown contract where withdrawals are unlimited, and has been available since 6th April 2015. If you were in "flexible drawdown" before this time, you will have been automatically converted to flexi­-access on 6th April 2015.

With flexi-­access drawdown there is no limit on the amount you can draw from your pension in any year. Whilst you will receive the first 25% of your pot tax free, you will be taxed income tax on the remainder. Following new rules put in place in April 2015 you can:

  • leave it all in the scheme
  • take the whole pension pot in one go
  • take just part of it

By taking income your annual allowance will reduce from £40,000 per year to £10,000 and you will be unable to use the carry forward option.

There is a charge of £100 (+VAT) to set up flexi-­access drawdown, or £300 (+VAT) to withdraw your entire pension pot through flexi-­access drawdown.

Before going into flexi-access drawdown we would strongly suggest seeking independent financial advice or guidance.

Beware of tax! By withdrawing your money you could be pushed over to higher rate tax, or you could be subject to emergency tax. If we have no notification of a tax code then you will be put on the emergency tax code 1060L on a Month 1 basis until further notification from HMRC is received.

Please contact us if you are thinking about going into drawdown.

24: What is capped drawdown?

Capped drawdown (available, if set up before April 2015) is an alternative to purchasing an annuity. This is only available to individuals who went into capped drawdown before the 6th April 2015.

You will still be able to invest up to £40,000 a year, including tax relief where applicable.

25: When can I request drawdown through Chelsea?

You can currently initiate drawdown from age 55.

Cofunds ensure that there are adequate funds available in your Trading Account to facilitate the drawdown. The cash available will be supplemented by the additional sale of units as and when required.

Please note, if you have chosen to take a Pension Commencement Lump Sum (PCLS) from the crystallisation amount this will only be paid once all transfers have been received. This means that if money has been invested via an SII the value could have fallen from the original value before the PCLS is paid.

26: I am already in drawdown. What will happen following the new rules?

If you are already in the flexible drawdown option, you will automatically be reverted to flexi-access. Previously you could not invest anything further into your pension, but following April 2015 you can take advantage of the £10,000 yearly allowance when in “flexi-access”.

If you are currently in capped drawdown, you can choose to move to flexi-access, but this will not happen automatically. Remember, by staying in capped drawdown, you would have the option to invest more into your pension than someone in “flexi­-access”.

27: What are lifetime annuities?

Unfortunately, you are not able to purchase annuities through us at Chelsea, but, for your convenience, here is some more information, you may find helpful.

Your pension scheme will pay your pension pot to an insurance company, who will set up an annuity contract. They will then pay you your pension for the rest of your life.

Buying an annuity on the open market gives you the opportunity to shop around, to find the right annuity for your needs.

The amount of pension your annuity will pay depends on a number of factors:

  • your age
  • if you want your pension to increase over time (for example with inflation)
  • your health
  • whether you opt for a joint or single life annuity

Things to bear in mind: an annuity will only pay an income whilst you are alive (unless it is a joint life annuity). You can choose to pay an annuity for a minimum period of time, even if you die before then. If you do die before the end of the guarantee period, any remaining balance will be paid to the recipient of your choosing, for example a spouse or other family member.

28: What happens to my pension when I die?

 

 

How can your pension be passed on? If you die before age 75 If you die on or after age 75
Lump sum Tax free

This will be taxed at a marginal rate of tax (based on the tax bracket, that the individual receiving the payment falls in to).

Income Tax free via an annuity or drawdown (both options available to any dependent or nominated beneficiary) Taxed as income via an annuity or drawdown (both options available to any dependent or nominated beneficiary)

29: Why is my illustration showing a loss in savings?

In April 2014, the FCA enforced a regulation which means all illustrations take into consideration the effect of inflation.

The illustration simply shows the potential buying power of your investment. £20,000 in 1950 would have bought substantially more than what £20,000 will buy today, and it is likely that this will be the case going forward.

This is also the case if you think about regular contributions. A contribution of £5,000 a year, is worth considerably less (in today's money) than a £5,000 investment you may have made 10 years ago.

30: I haven't started saving for my retirement, where is a good place to start?

Firstly, remember that it is never too late to start planning for your retirement.

In your 20s: The earlier you start saving the better, as the investments would have more time to grow. It is worth thinking about contributing to any workplace pension, as your employer may pay in contributions on your behalf. If there is no such scheme available, you can always think about a personal pension.

In your 30s: You are likely to be in a situation where you need to put more into a pension than someone starting their 20s, to achieve the same income in retirement. There is, however, still plenty of time to save. It is worth thinking about contributing to any workplace pension, as your employer may pay in contributions on your behalf. If there is no such scheme available, you can always think about a personal pension.

In your 40 or 50s: If you haven't started saving yet, you may need to have a serious think about how much you are going to need to save. It is worth thinking about contributing to any workplace pension, as your employer may pay in contributions on your behalf. If there is no such scheme available, you can always think about a personal pension.

In your 60s:  If you haven't put anything aside for your pension, your options are extremely limited. It is worth thinking about contributing to any workplace pension, as your employer may pay in contributions on your behalf. If there is no such scheme available, you can always think about a personal pension.

Consider investing the maximum that you can afford. Compounding has an amazing effect on investing. Click here to find out more.
Alongside this, you may want to consider alternative savings. Investing in an ISA is potentially tax efficient, however, unlike a pension, tax relief is not available on the contributions, but any savings can be withdrawn free from personal tax.

NB: Make sure that you also have adequate and accessible emergency savings.