Stakeholder pensions

What are Stakeholder pensions?

Stakeholder pensions are straightforward, low-cost pensions that were introduced in April 2001 as part of a government drive to increase the number of people providing for their retirement.

Under this scheme, employers, unless exempt, are required to give employees access to a Stakeholder pension. The employer is not required to contribute to the pension but they are required to collect employee’s contributions and pay them into the plan.
Stakeholder pensions have to meet certain mandatory standards. These include:

• an overall charge limited to a maximum of 1.5% per annum for the first ten years and 1% thereafter.
• the provider must offer a default fund with an element of lifestyling.
• the facility to stop and restart contributions without penalty.
• transfers must be accepted and transfers out must be penalty free. The only exception to this is the facility for Providers to levy a Market Value Adjuster (MVA) with profit funds following prolonged poor market conditions.
• an annual information statement to members.
• a governance procedure, established to safeguard the interests of members.
• the legislation allows contributions to both Personal and Stakeholder pensions.
• contributions of up to £3,600 per annum can be paid, irrespective of actual employment earnings.
• there is no minimum age and any relative can make payments on behalf of the stakeholder.
• contributions over this amount will be subject to Inland Revenue contribution limits for Personal Pensions.