How do Stakeholder Pensions differ from other pensions?

By law, stakeholder pensions must meet a number of minimum standards to make sure they offer value for money, flexibility and security.

Stakeholder pension providers can only charge you a maximum of 1.5% of the value of your pension fund each year for the first 10 years then capped at 1% each year for managing your fund. The charges are taken from your fund.

As well as the one per cent, the law allows pension providers to recover costs and charges they have to pay for certain other things. For example, when they have to pay any stamp duty or other charges for buying and selling investments for your fund, or for particular circumstances such as the costs of sharing a pension when a couple divorce. These expenses are found in other pension schemes, not just stakeholder pensions.

Any extra services and any extra charges not provided for by law must be optional. Extra services include advice on choosing a pension or life assurance cover. You must have agreed to these extra charges as a separate arrangement and the charges must be clearly defined for the services you are being offered.

The stakeholder pension standards can also include the following.

  • If you choose to transfer into or out of a stakeholder pension, or you stop paying your contributions for a time, the stakeholder pension scheme provider will not charge you extra.
  • All uk stakeholder schemes will accept contributions of as little as £20, which you can pay each week, each month or at less regular intervals.
  • The scheme must be run by trustees or by an authorised stakeholder manager, whose responsibility will be to make sure that the scheme meets the various legal requirements.