STAKEHOLDER PENSIONS 

With a stakeholder pension you pay money to a pension provider (eg an insurance company, bank or building society) who invests it for you. These are a type of personal pension but they have to meet some minimum standards set by the government. You can start making payments into a stakeholder pension from £20 per month. You can pay weekly or monthly. If you donít want to make regular payments you can pay lump sums any time you want. Please read the terms and conditions of any stakeholder pension carefully and if you have any doubts be sure to speak to an independent financial advisor.

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The rules regarding Stakeholder Pensions

The rules for stakeholder pensions changed on 1 October 2012. If youíre starting a new job now or returning to one, your employer doesnít have to offer you access to a stakeholder pension scheme. If youíre in a stakeholder pension scheme that was arranged by your employer before 1 October 2012, they must continue to take and pay contributions from your wages.

Your arrangements

This arrangement is in place until: you ask them to stop you stop paying contributions at regular intervals you leave your job If you leave your job or change to another personal pension, the money they have paid in stays in your pension pot unless you have it transferred to a different pension provider.

More about stakeholder pensions

Stakeholder pensions were intended to encourage more long-term saving for retirement, particularly among those on low to moderate earnings. They are required to meet a number of conditions set out in legislation, including a cap on charges, low minimum contributions, and flexibility in relation to stopping and starting contributions. Employers with five or more employees are required to provide access to a stakeholder pension scheme for their employees unless they offer a suitable alternative pension scheme. The features of stakeholder pensions were intended to make them cheaper to sell than existing personal pensions and to provide a more transparent and attractive saving vehicle.

Stakeholder pension explained

With a stakeholder pension, you will pay money into a pension provider who will invest it for you (e.g. in shares). Like other pension schemes there is some degree of risk involved because you will be investing in the stock market, however, they are designed to be low risk products with a choice of risk available to you.

Management charges with a stakeholder pension cannot be more than 1.5% of the fundís value for the first 10 years and 1% after that. You can start making payments into a stakeholder pension weekly or monthly with the minimum funds being £20 per month.

All stakeholder pension plans must meet certain security standards and have independent trustees and auditors. You must also be able to start and stop payments whenever you wish or even switch providers when you choose without being charged or questioned.

Should I take out a stakeholder pension?

If you are thinking about which pension to take out you should ensure that you do your research properly. Remember that you will not have access to your contribution until you reach retirement age so you should ensure that you know exactly what you are getting yourself into. If you are in any doubt then you should talk to an independent financial advisor who will be able to advice you on the best course of action for you. This could cost you money, however, save you money in the long term.

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