A stakeholder pension is a money purchase pension provided by a bank, building society, or insurance company. Trade unions also offer stakeholder pensions to members who contribute to their pension fund. Pension providers invest in pension funds on your behalf. The value of your pension fund depends on how much you have contributed and how well the fund’s investments have performed.
The pension provider invests the pension fund on your behalf. The value of your pension fund will be based on how much you have contributed and the last performance of fund investments. Regular contributions are advisable. You can halt payment contributions for some time if needed without it costing. This, however, will result in a smaller pension fund unless you make extra payments later.
When you reach the gained age to receive payment from the stakeholder pension fund, they can use it in the fund you have built up to buy an annuity. This is a regular income, payable for life, which you can buy from a life insurance company.
When can you take your stakeholder pension?
Fifty-five years of age is usually the earliest you can take your stakeholder pension, depending on your arrangements with the pension provider. You don’t need to be retired from work to get your stakeholder pension benefits.
How stakeholder pensions differ from other personal pensions
Stakeholder pensions must meet government standards to offer value for money, flexibility, and security. The criteria include the following:
- Limit on annual management charges–Managers can charge fees of up to one and a half percent of their pension fund each year for the first ten years and, after that, up to one percent.
- Flexibility–You can switch to a different pension provider without penalty charges, start contributions from a specified amount a month, and pay weekly, monthly, or lump sums when you want. You can stop, re-start, or change your contributions without penalty charges.
- Security- Independent trustees responsible for meeting the legal requirements must run the pension.
Is a stakeholder pension suitable for you?
A stakeholder pension could be suitable for you if you/your:
- Self-employed and don’t have a workplace pension
- Aren’t working but can afford to pay for a pension
- Want to save money for retirement on top of your workplace pension
- Employer offers it as a workplace pension
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