Stakeholder Pensions
A stakeholder pension is a type of low-charge pension. Stakeholder pensions must satisfy a number of minimum government standards to ensure that they offer value for money and flexibility. These standards include:
- management charges in each year must not amount to more than the charge cap as set down by law – for people who join a stakeholder pension scheme on or after 6 April 2005 the cap is an annual management charge of 1.5% for the first 10 years, which will reduce to 1% from then onwards if these members remain in the scheme
- the stakeholder pension contract must not have charges for members transferring into or out of the stakeholder pension scheme
- all stakeholder pensions schemes must accept contributions of £20 or more, though some may accept lower payments
- stakeholder pension schemes must be run in the interest of their members, and will either have trustees or they will be run by a scheme manager
Note: The annual charge for members who purchased their stakeholder pension scheme before 6 April 2005 will remain at 1% for as long as they remain in the scheme. However, if such members move to another stakeholder pension scheme on or after 6 April 2005, the new charge cap of 1.5% will apply for the first ten years of membership of that new scheme.
Stakeholder pensions could be a good option for people who currently earn more than around £10,000 a year. However, they are available to almost everybody, including people in employment, fixed contract workers, the self-employed and people who are not actually working but can afford to make contributions. It’s also possible to contribute to someone else’s stakeholder pension - for instance someone can make contributions to their non-working partner’s stakeholder scheme on their behalf.
How much can be invested in a stakeholder pension?
There is no limit to the amount that can be invested in a stakeholder pension scheme. However, tax relief can only be otained on contributions up to the level of a person's salary (subject to an annual limit of £215,000 for the tax year 2006/07). It is possible to contribute up to £3,600 per year (including tax relief) into a stakeholder pension scheme even if a person is not earning.
A member of an occupational pension scheme may also contribute to a stakeholder pension scheme.
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