4. Stakeholder pensions

You pay money to a pension provider (eg an insurance company, bank or building society) who invests it, eg in shares.

These are a type of personal pension but they have to meet some minimum standards set by the government, eg:

  • management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that
  • you must be able to start and stop payments when you want or switch providers without being charged
  • they have to meet certain security standards, eg have independent trustees and auditors

You can start making payments into a stakeholder pension from £20 per month. You can pay weekly or monthly. If you don’t want to make regular payments you can pay lump sums any time you want.

Your employer offers a stakeholder pension

The rules for stakeholder pensions changed on 1 October 2012. If you’re starting a new job now or returning to one, your employer doesn’t have to offer you access to a stakeholder pension scheme.

If you’re in a stakeholder pension scheme that was arranged by your employer before 1 October 2012, they must continue to take and pay contributions from your wages.

This arrangement is in place until you:

  • ask them to stop
  • stop paying contributions at regular intervals
  • leave your job

If you leave your job or change to another personal pension, the money they have paid in stays in your pension pot unless you have it transferred to a different pension provider.