Stakeholder pensions are a type of personal pension. They must meet certain standards to ensure they’re flexible and have a limit on annual management charges. The minimum payments are also low and you can stop and re-start payments whenever you wish.
How stakeholder pensions work
Stakeholder pensions work in much the same way as other Personal Pensions.
The value of your pension fund will be based on how much you have contributed, the charges and how well the fund’s investments have performed.
It is best to make regular contribution payments if you can, but you can stop payments for a while if you need to without penalty. However, that will mean you have a smaller pension fund unless you make extra payments later.
How stakeholder pensions differ from other personal pensions
By law stakeholder pensions must meet several minimum standards to make sure they offer value for money, flexibility and security. The standards include:
Limit on annual management charges: Managers can charge fees of up to 1.50% of your pension fund each year for the first 10-years you hold the product, and thereafter up to 1%
Flexibility: You can switch to a different pension provider without the provider you leave charging you.
Contributions: These can start from as little as £20, and can be paid weekly, monthly or at less regular intervals. You can stop, re-start or change your contributions whenever you want. There are no penalty fees.