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Stakeholder pensions are a type of personal pension that have to meet certain minimum standards. They were introduced in 2001 in order to provide a flexible low-cost means of saving for your retirement. They aimed to avoid a lot of the negative features of old-style pension contracts.
Stakeholder pensions have to meet certain mandatory standards including:-
- An overall charge limited to a maximum of 1.5% per annum for the first 10 years. The charge must reduce to a maximum of 1% per annum after that time;
- The facility to stop and restart contributions without penalty;
- Transfers must be accepted and transfers out must be penalty free;
- Contributions of as little as £20 must be accepted
Interestingly, since Stakeholder pensions were introduced, many Personal Pensions now offer charging structures and flexibility similar to or lower than that of Stakeholder, whilst offering a much wider range of investment funds. The minimum contribution levels, however, tend to be significantly higher.
When you retire you are able to take 25% of the accumulated fund in cash, currently tax-free. The remainder of the fund must be used to create retirement income, which will be taxed as earned income.
When you take income from your pension you may need to decide whether to provide that all or part of it continues for a widow/widower or dependent child after your death, and whether to provide that the pension income will increase each year.
If you die before retiring, the fund can normally be inherited by those left behind.
Contact us for further advice on pension issues, and help in choosing a pension that is right for you.
For further information on general pension planning issues, see Pensions
Note: The value of certain of the investments available within pensions can fall as well as rise, and you are not guaranteed to get back the full amount that you invested. When past performance of an individual fund is used as part of the selection criteria you should note that past performance is not necessarily a guide to the future.