Stakeholder pension

Understanding Personal Pension and Stakeholder Pension

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Personal pension, like any other type of pension plan, is a retirement benefit, which can be acquired by means of paying pension providers or financial organizations. Payments are commonly paid monthly. And organizations that manages fund for plans are more often than not banks, insurance companies, etc.

It is, as of now, the most popular type of pension plan to those who have no means of access to a company pension scheme. You can avail it, even if your just 18 years old, and you can start claiming its benefits anytime from age 55.

Personal pension is best suited for you if you are one of these following employees:

  • Whose employers does not offer any company pension scheme
  • Who have a modest amount of payment that desire to put up the amount they acquire from company pension
  • And who, although have the option of paying into a company pension, choose not to

Aside from employed individuals, it can also be availed by unemployed individuals, only of course if they can afford paying for a plan.

And it is, on the other hand, not suited for the following employees:

  • Whose employers offer access to a stakeholder pension scheme, with an employer contribution
  • And whose employers offer a company pension scheme.

Stakeholder Pension Standards

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Do you know that stakeholder pension differ from other personal pension not just because it offers flexibility, but also because of the strict standards it follows? It should, by law, follow minimum standards to guarantee costumers like you that it gives value for money, security and flexibility.

And these standards are: limit on yearly management charges, security and flexibility.

For limit on yearly management charges, this means that:

  • For the first ten years under this scheme, managers can charge fees of up to one and half per cent of your pension fund yearly
  • For the continuing years, up to one per cent yearly

While for security, sanctioned managers and/or trustees should manage the scheme. And they are responsible in ensuring that the scheme meets all legal requirements.

And for flexibility, this must make sure that you, as the policyholder, are allowed to:

  • Start payments even as low as £20. And can be given not just at regular, but also at less regular periods
  • Stop, re-start and even change payments whenever desired. And should not be fined when doing so
  • Switch to a different provider, and also should not be fined by the provider you leave.

What to Know about Stakeholder Pension

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Being a flexible type of personal pension, defines this scheme. Known as the stakeholder pension, it is so flexible that you could change, stop, and even re-start your contributions whenever you want. And if that does not make it flexible enough for you, it also has limit on annual management charges and very low minimum contributions.

And this feat is not just for show. It should pass minimum standards defined by law to ensure that the service it offer is flexible, secured and gives value to your money.

This, by the way, works just like any other money purchased pensions. To increase your fund, you need to contribute money. And thru a certified manager your fund will be invested.

And based on your contribution and the way your fund’s investment have performed you will know what your fund’s value is. In other words, to increase its value, you need to contribute regularly to your fund, and hope that its investment will perform well.

Though that doesn’t mean that you’re compelled to contribute at all times, remember that because of its flexibility, you are allowed to change, stop and/or re-start payments whenever you desire. Though stopping will not be a good idea, for it will only lessen your fund.

Standards for Stakeholder Pension

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Although it is a type of personal pension, a stakeholder pension is much different from other of its type. It needs to meet some necessary minimum standards in accordance to the law. These are to make sure that they offer flexibility, security, and value to your money.

And the following standards that a stakeholder pension should meet are firstly, Flexibility. It should be flexible enough that you:

  • Can change, stop or re-start your payments whenever you desire. And there should be no penalty if you do so.
  • Can start payments for as low as £20. And these could be given even at less regular intervals, not just weekly, monthly, etc.
  • Can switch to different providers without being charge of any when doing so.

Next is Security. It should be secured enough that it is managed by an approved stakeholder manager or trustees. They have the responsibility to ensure that the said scheme has accomplished all necessary legal requirements.

And lastly is Limit on annual management charges. It should be that for the first ten years that you hold the scheme, managers should charge fees of up to one and a half per cent of your pension fund. And for the following years, it should be up to one per cent.