What is a Stakeholder Pension?
Simply put, a stakeholder pension is a savings scheme designed for providing for your retirement. It can be either an occupational or personal scheme as long as it is certified as fulfilling certain minimum standards laid down in legislation.
The main provisions that all stakeholder pension
schemes must satisfy are:-
Charges
The provider or manager of a stakeholder scheme will normally levy charges to cover their costs and provide a profit. These charges were limited to being no more than 1% of the value of your fund each year. However, with effect from 6 April 2005 the annual management charge was increased to 1.5% for plans set up from this date. The charge will be 1.5% for the first ten years and 1% thereafter.
If a provider is making available additional services, such as personal financial advice, then an extra charge can be made. However, this must be agreed with you in advance and you are still able to join that scheme without having to take the additional services.
Flexibility
Contributions
Not only are stakeholder pensions designed to be low cost, they are also highly flexible. Legislation requires that you be allowed to contribute regularly or occasionally, according to your situation. It is usually best if you adopt a regular pattern but if you need to stop for a while you can do so, without penalty.The provider or manager can stipulate a minimum amount of contribution that they will accept at any time. However, this cannot be more than £20.
If you are making payments through your employer, then you may have to give at least a month's notice of stopping contributions. The employer is also permitted to only allow changes to be made every six months.
Leaving Service
If you move to a new job you should check if your new employer has a scheme you can join. You may find that you are best advised to join your new employer's scheme. You might still be able to contribute to your existing stakeholder scheme if you so wish but you need to check if you satisfy the conditions for doing this.If you want to transfer what you have already saved to a new scheme, you can do this without any charge being made by the existing scheme. If the new scheme is a stakeholder, it must accept the transfer without charge.
Information
Your stakeholder scheme must provide certain information which we have made the subject of a separate page called "Your Right to Know".
