Types of Penisons

Stakeholder Pension

What is a Stakeholder Pension?

Stakeholder pensions were introduced in April 2001. They were essentially personal pension plans but met specified government standards in terms of charges, access and terms. Although there is no longer a requirement for employers to arrange a stakeholder scheme, many employees with stakeholders will continue to fund them, and employers are obliged to make payments of the employee contributions direct to the provider until such time as the employee decides to cease payments. Many employers may retain existing schemes to meet the work-based pension requirements, so it would be useful to look briefly at the main features.

There was a maximum annual charge of 1 per cent per annum of the fund value for plans started before April 2005. For plans started from April 2005, the charge cannot exceed 1.5 per cent per annum for the first 10 years and 1 per cent after that.

Stakeholder Pension
  • • The minimum contribution required under the contract cannot exceed £20.
  • • Contributions can be stopped and restarted at any time without penalty.
  • • The scheme must offer a default investment option for those who cannot, or do not wish to, choose a fund.
  • • The provider must offer a facility to move the planholder’s investment into low-risk areas as they approach retirement.

Employers with five or more employees were required to make a stakeholder scheme available to their employees, unless they had an occupational pension scheme or there was a personal pension scheme available into which the employer paid at least 3 per cent of gross salary as a contribution.

Older stakeholder pensions do not benefit from the new pension freedoms; it may be beneficial to transfer you pension to a newer pension. Talk to an adviser today and discuss the options you have.

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