Stakeholder pensions

Stakeholder pensions are similar to personal pensions and are also a money purchase type of pension. They are flexible and especially suitable if you can only afford to save small sums.

Employers with five or more staff must generally offer access to a stakeholder pension if they do not offer an alternative scheme. They may also contribute to the scheme.

Basic features of a stakeholder pension

• Limited charges - providers cannot charge more than 1.5% of the fund value each year in the first 10 years, after which the maximum annual charge is 1%.
• Low minimum contributions (start with as little as £20 and pay weekly, monthly or yearly).
• Ability to change contributions.
• Penalty-free transfer of your funds to another pension plan.
• A default investment fund - a fund your money will be invested in if you don't want to choose your own investments.

Is a stakeholder pension right for me?

There are many things to think about when deciding on whether to contribute to a type of pension.

It might be right for you if:

• You have no existing pension apart from a state pension.
• You're self-employed.
• You're employed but your employer does not contribute to your company pension.
• You want to top up your company pension scheme (note that paying additional voluntary contributions may be a better way of doing this).

It might not be right if:

• Your employer offers a company pension scheme. If they do offer access to one you should seriously consider joining it. Read more about the benefits of joining a company pension scheme.

Where can I get a stakeholder pension?

• If you are unsure and need advice speak to a financial adviser - find an adviser.
• You can get a stakeholder pension from your employer, if they offer one, and from some financial services companies.
• Some trade unions also offer stakeholder pensions to their members.