Pensions Guide | Pensions Help Product Information | How do Stakeholder Pensions Differ From Other Pensions?

By law, stakeholder pensions must meet a number of minimum standards to make sure they offer value for money, flexibility and security. The stakeholder pension standards include the following:

  • Stakeholder pension scheme providers can only charge you a maximum of one per cent of the value of your pension fund each year to manage your fund. The charges are taken from your fund.
  • As well as the one per cent, the law allows stakeholder pension scheme providers to recover costs and charges they have to pay for certain other things. For example, when they have to pay any stamp duty or other charges for buying and selling investments for your fund, or for particular circumstances such as the costs of sharing a pension when a couple divorce. These expenses are found in other pension schemes, not just stakeholder pensions.
  • Any extra services and charges not provided for by law must be optional. Extra services include advice on choosing a pension or life assurance cover. You must have agreed to these extra charges as a separate arrangement, and the charges must be clearly defined for the services you are being offered.
  • If you choose to transfer into or out of a stakeholder pension, or you stop paying your contributions for a time, the stakeholder pension scheme provider will not charge you extra.
  • All stakeholder pension schemes will accept contributions of as little as £20, which you can pay each week, each month or at less regular intervals.
  • All stakeholder pension schemes must be contracted-out, but you can choose whether to be a contracted-in or a contracted-out member of the scheme.
  • The scheme must be run by trustees or by an authorised stakeholder manager, whose responsibility will be to make sure that the scheme meets the various legal requirements. These trustees or stakeholder managers will decide how your funds in a stakeholder pension are invested. Some schemes may also offer you a choice of investments, but you do not have to make these investment choices if you don’t want to – you can leave them to the trustees or managers.

Some stakeholder pension schemes may hold your money in what is called an individual pension account (IPA). This is an arrangement designed to provide a simple and clear way of holding money in a pension scheme. If you have an IPA, your money will be invested in a selection of investments, including pooled (shared) funds such as unit trusts. These allow you to invest in stocks and shares in a way that spreads the risks. The values of these funds are shown in many daily newspapers, so you should easily be able to find out what your funds are worth. And you can easily transfer your pension scheme savings in this kind of arrangement from one scheme to another.