Lockhart Grey Financial Planning Ltd

A Stakeholder pension is a form of low cost Personal pension aimed at encouraging those people who do not currently have any pension provision to save for their retirement in place. They became available on the 6th April 2001. They do not form any part of the state pension.

In order to reach as wide an audience as possible, Stakeholder pension schemes are intended to be both flexible and easy to understand. Employers with 5 or more employees have had an obligation for the provision of access to a stakeholder pension scheme for their employees since 8th October 2001, although it is not compulsory to save for retirement with a Stakeholder Pension plan or any other savings related product for that matter.

Stakeholder pension plans are privately managed and funded but must operate within a standard framework laid down by Government guidelines.

Stakeholder Pension plans work in a way similar to Personal Pension plans; they are individual pension arrangements, meaning that they are personal and portable to that individual- you can take them with you if you change jobs.

We can research the market on your behalf to find a suitable Stakeholder Pension plan, it may be that a Stakeholder Pension meets your needs for your retirement provision. Following the recent sweeping changes that were made on the 6th April 2006 to pension legislation (see section on Pension simplification) these contracts are extremely flexible and can allow contributions to be made of up to 100% of your earnings.

Furthermore these plans can be set up for non-working spouses and also children and grandchildren where up to £3600 can be invested annually. (The Annual Allowance and Lifetime Allowance applies)

An important aspect of the ‘no penalties’ rule in relation to this type of pension plan is that you do not have to delay starting a plan until you find the right provider. You can start a plan immediately. If the pension provider doesn’t perform as well as you expected, you can simply take your fund and transfer it to another provider, without penalty. Another big plus for the Stakeholder pension scheme is that providers must allow a minimum premium of £20. This provides more flexibility compared to other Pension contracts where minimum premiums may be higher;furthermore there is flexibility to stop and start contributions with unlimited frequency, as suits your own individual circumstances.

Stakeholder summary

If you just want a quick overview of what a stakeholder pension plan is, here it is!

•    Tax relief on your contributions at your highest marginal rate
•    Money purchase scheme
•    No more than £20 per month minimum contribution
•    Permissable contribution limit of up to £3,600 pa gross (with no evidence of earnings) or 100% of earnings. (subject to the Annual and Lifetime Allowance)
•    Single annual management charge of no more than 1% of the plan value, taken from the fund/s. There are no up front charges to be paid.
•    You have the flexibility and are free (no charges or penalties) to:
• Stop, increase, decrease or restart your pension contributions any time that suits your own circumstances.
• Transfer your money to another stakeholder scheme if you wish.
•    As all plans will have a default investment choice, this is designed to help make purchasing a Stakeholder pension plan easier for you, however it does not guarantee the default fund will necessarily be the right one for you, we recommend advice be sought.