PLANNING
Stakeholder pensions
Stakeholder pension schemes are a type of defined contribution scheme. They
offer a flexible way to build up retirement income benefits, while benefiting
from tax advantages, whether you are employed, self-employed or not working.
They are designed to be accessible to all, and have
limits on the charges that can be imposed.
Stakeholder pensions are individual contracts between
you and the pension provider. The pension provider is
often an insurance company or an investment platform,
although it can also be a bank or building society.
If you are employed, your employer can contribute to
your stakeholder pension.
Other people are also able to contribute, and
you can contribute to other people’s.
For example, you could contribute to a stakeholder
pension belonging to your spouse, partner or even
your child, to allow them to start building up
retirement benefits from an early age.
Since 2006, there has been no restriction on the
number of different pension schemes that you can
belong to, although there are limits on the total
amount that can be contributed across all schemes
each year if you are to receive tax relief on
contributions. This means you
can have a stakeholder pension to provide additional
retirement benefits, even if you're a member of a
workplace pension scheme.
Stakeholder pensions are flexible and portable. If you
change jobs, or stop working, you can continue
contributing to the scheme, and, if you join a new
employer, they may also decide to contribute to it. If
you do change jobs, you should ensure the pension
provider allows your contributions to continue
(especially if your old employer was paying
contributions on your behalf).
You can access your stakeholder pension at 55 and
withdraw 25 per cent of the sum tax-free.
Key points
These have died out to some extent, to be
replaced by other types of pensions such as
SIPPs (p24) or workplace pensions
They are tax efficient and you can access
your funds from age 55
Once you reach 55, 25 per cent of your pension
is tax free
Stakeholder pensions are flexible and portable
Access at
55
Withdraw (tax-free)
25%
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