Home > Pensions > Understanding Stakeholder Pensions

Understanding Stakeholder Pensions

By: J.A.J Aaronson - Updated: 28 Oct 2017 | comments*Discuss
 
Stakeholder Pension Scheme Employment

One of the government’s top financial priorities is to give individuals access to affordable secure pension schemes. This priority has been the subject of considerable thought in recent times, in the wake of the recent ‘pensions crisis’.

An increasing number of employers now offer occupational pension schemes, whereby employees are given the option to contribute a part of their pay packet to a pension plan. In many cases, the employer then makes their own contribution relative to the amount paid in by the employee.

The Basics

A large number of employees still do not have access to this type of pension scheme, however, and stakeholder pensions are designed with these individuals in mind. This type of pension scheme is a Personal Pension, into which you place money in order to build your total fund. On maturity (generally the date of your retirement), the total fund is available to you for the purpose of purchasing an annuity from a life insurance company, which will act as a regular income until your death.

Stakeholder pensions are uniquely well-suited to those who are self-employed or working but unable to afford an occupational pension scheme. A stakeholder pension allows the contributor to stop and start payments when it suits them, and they are subject to stringent government guidelines that cover basic elements such as the amount that the pension provider can charge in management fees and a minimum level of security for your money.

Furthermore, the guidelines state that you can make a minimum contribution of only £20 and can ‘pause’ repayments as often as you wish without incurring any penalties. These features make stakeholder pensions particularly valuable for those on low or irregular incomes.

Pension Managers

When you put money into a stakeholder pension scheme, the responsibility for this money is passed to a pension manager. Your money is then invested, generally in stocks, with the ultimate aim being to increase the amount of money in your fund. If your fund performs well, then you should end up with a considerably larger sum at maturity than the total amount that you have contributed.

If your fund is not performing well, you are free to change providers at any time. Furthermore, the guidelines on security mean that there is a legal framework to which managers must adhere in order to keep your money safe.

Highly Flexible

Although a stakeholder pension is highly flexible, and is available to everyone regardless of their employment status (you can even contribute if you are unemployed), it may not necessarily be the best choice for you. If you have a number of pension options from which you can choose, then there are certain key questions that you need to consider.

In the first instance, it is important to note that a stakeholder pension is intended as an alternative for those who do not have access to an employer-sponsored pension scheme. If you have access to such a scheme (in which your employer makes contributions in addition to your own), then it is likely that this will be a better option as your pension ‘buying power’ is increased considerably with an additional contributor. If this is not the case, however, then a stakeholder pension may well be worth considering.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Uel - Your Question:
My pension is paid monthly how can I change it to be paid weekly.

Our Response:
You would have to contact your pension provider directly to ask this question.
TheTaxGuide - 30-Oct-17 @ 2:12 PM
My pension is paid monthly how can I change it to be paid weekly.
Uel - 28-Oct-17 @ 8:46 PM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • MH829567
    Re: What Does Road Tax Pay For?
    Road Tax doesn't pay for anything cos it don't exist. Vehicle Excise Duty or CAR tax pays for the environmental effects of the…
    9 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to be paid weekly not monthly can this be changed ?
    5 July 2019
  • Sandra
    Re: Payment of Pensions
    I want my pension to change from monthly to weekly can thus happen?
    5 July 2019
  • vic
    Re: How Will My Second Job Be Taxed?
    my son is at uni and works on a sat for 8 hrs, he has just started a full time summer job until uni goes back and has been…
    4 July 2019
  • Jane
    Re: How Will My Second Job Be Taxed?
    Hi, I've recently been offered 2 part time positions (very similar roles) and am wondering if I could accept both offers? In…
    4 July 2019
  • Stace
    Re: What is My Tax Code?
    I have two jobs but one job I only do about 20 hours a month but do more with the other one... I have different tax codes with both jobs?…
    28 June 2019
  • Nat
    Re: How Will My Second Job Be Taxed?
    Hi I have recently left my job to do some ad hoc work on a self employed basis. Working 1-2 days a week, work isn’t always…
    5 June 2019
  • Sharon
    Re: Claiming Tax Relief on Mileage
    I’ve just started working for a care firm who pays 30p a mile how do I claim up to 45p what do I need to do to claim the 15p
    2 June 2019
  • Macspod
    Re: Should I be Paid Mileage Allowance?
    Hi, My employer is applying rules that do not match the HMRC documents regarding what journeys should be paid mileage…
    31 May 2019
  • Bex
    Re: How Will My Second Job Be Taxed?
    I work 24 hrs per week at £11ph If I get another job working 16hrs per month at £12ph What will my tax be on the second…
    30 May 2019