As a cost effective alternative to standard personal pensions investors should find comfort in knowing that they can contribute to a flexible alternative for their retirement.
Stakeholder pensions are privately managed and funded but most operate within a standard framework laid down by the Government. These pensions are very similar to personal pension plans; they are individual arrangements, meaning that they are personal and portable – allowing you to transfer the plan if you were to change jobs.
Employers with 5 or more employees have had an obligation to provide their employees with access to a stakeholder pension scheme since 8th October 2001, although it is not compulsory to save for retirement with a stakeholder pension plan.
Following the changes to pension legislation on 6th April 2006, these contracts are flexible and can allow contributions to a maximum of 100% of earnings, up to £40,000.
A major difference of that of personal pensions is that providers must allow a minimum premium of £20 per month. This provides much needed flexibility compared to other pension contracts where minimum premiums may be higher; furthermore, there is flexibility to stop and start premiums with unlimited frequency.