Stakeholder pensions - simple, cheap and worth having

Stakeholder pensions - simple, cheap and worth having

20 February 2020
Reading Time: 5 mins

Stakeholder pensions are cheap, easy, and upfront about what they invest in. Anyone can have one, and you can make regular contributions or just put in what you can afford each month. For anyone who has ever worried that pensions are too complicated – they were designed to be your solution.

What is a stakeholder pension?

Stakeholder pensions are a specific kind of private pension. They were introduced back in 2001 as an antidote to some of the old-fashioned – and very expensive – pension contracts on offer at the time. The idea was that they were transparent – so you knew exactly where your money was invested. Charges were capped; and they are open to everyone.

Previously, you could only contribute to a pension if you were working. Stakeholder pensions are for anyone. So, if you’re not working, someone else can pay in up to £2,880 a year for you – and the Government will bump that up to £3,600.

Unlike a State Pension, which you can only start to claim once you have reached the age of 66, a stakeholder pension allows you access to your funds as soon as you are 55.

They are available from most banks, building societies, insurance companies, investment companies and financial advisers. Any UK resident under the age of 75 can have one. Each plan has to meet the minimum standards laid down by the Government, which is good as it means you won’t get ripped off. These standards include:

  • Limited charges – You will only face one charge – the Annual Management Charge or AMC. This is the cost of having someone manage your account, and by law you cannot be charged more than 1.5% of the total in your pension fund. After ten years this drops to 1%.
  • Low minimum contributions – You can put in as little as £20 whenever you can afford it.
  • Flexible contributions – You can put money in as and when you want.
  • Penalty-free transfers –
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