What is Stakeholder?

It is important to understand what Stakeholder pensions are and why they have been introduced before you think about making a decision.

The Background:

The UK population is ageing and it is becoming more expensive for the Government to maintain the Basic State Pension, even at its present meager levels.

Successive Governments have tried to encourage more people to make sufficient provision for their retirement. This Government's answer is an overhaul of the welfare system, including the introduction of Stakeholder pensions.

Stakeholder pensions were made available from 6 April 2001, with the intention of increasing the number of people saving for retirement.

The Specifics

Stakeholder pensions are a low-cost pension, designed to ensure that most earners will have access to private pension provision.

A pension plan must meet certain requirements before it can be regarded as a Stakeholder plan. The current requirements include:

  • Charges - the plan must have no charges other than an annual management charge of no more than 1%, i.e., the only charge applied to each plan will be a maximum of 1% of the value of the fund each year with no initial charge or exit penalty.
  • Maximum Payments - up to £3,600 or a percentage of an employee's earnings, whichever the greater can be paid to a plan annually including all employer contributions.
  • Minimum Payment - payments as low as £20 can be made at any time.
  • Flexibility - payments can be stopped or started at any time or your pension plan can be moved to another provider free of charge.