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What are Stakeholder Pensions?

Stakeholder Pensions, introduced in 2001, are a type of defined contribution pension, designed as a simple pension option. They are individual agreements between you and a pension provider, although there is no cap to the number of stakeholder pensions you can hold, there are limits to how much you can pay in during the year.

How does a Stakeholder Pension Work?

Stakeholder Pension could be a worthwhile investment option for people on lower or changeable employment income, like a contract or seasonal workers and the self-employed.
Due to stakeholder pensions’ simplicity and stability, people within the UK use them as investments for their children to build up retirement benefits from an early age.

The Government set the minimum standards that stakeholder pensions and their providers need to follow. These include:

  • Limited fund charges
  • Charge-free transfers
  • Flexible contributions
  • Low-value investments

Stakeholder Pensions and Retirement

Due to pension freedoms introduced in 2015, you can now access your pension at aged 55 and withdraw 25% as a tax-free lump-sum should you wish. The value of your stakeholder pension is linked to the following:

  • the amount of money you’ve invested
  • when you made the investments
  • the investment growth of your pension
  • the level of charges made by the pension provider

The amount of income you may receive through a stakeholder pension can vary depending on the policy options selected. Factors including income paid in the event of your death, income increases due to inflation and even the frequency at which you wish to be paid can all affect the value of the funds you receive.

Any pension payments above the 25% tax-free lump sum are subject to income tax but not national insurance contributions, so this needs to be considered when planning for retirement.

What’s best for you and your pension?

It is always advisable to get professional financial help when investing in your future and understanding what the best option for you is when you retire.

At Pension Works, we offer a full, independent retirement planning service, to help you get the most from your pension savings. We will assess your current stakeholder pensions or any other private pensions you may have for free and advise on how best to invest your savings to reach your retirement goals.

To start your free stakeholder pension assessment, please fill in the form or call 0808 164 2664 today.

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