What are stakeholder pensions?

Stakeholder pensions are flexible and are designed to help if you are only able to save smaller amounts towards funding your retirement. Some employers offer one but you can start one yourself.

Features of a stakeholder pension

As well as the tax relief you receive on the contributions, within government limits, there are a number of other things to think about when it comes to stakeholder pensions:

  • 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. And just remember, as it's invested, the value of your investment can go down as well as up and you may not get back what you put in.

Things to consider

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

Some employers offer one and you can start one yourself.

It might be right for you if:

  • You have no existing pension apart from a State Pension.
  • You're self-employed.
  • You want to top up your workplace pension scheme. (There may be other ways of doing this - please check with your company pension scheme provider.)

It might not be right if:

  • You are employed. (It's the legal obligation of your employer to auto-enrol you into a pension scheme, and to opt out you'll need to tell your employer within one month of being enrolled.)

Where can I get a stakeholder pension?

  • 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.
  • If you are unsure and need advice speak to a financial adviser.

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