Stakeholder pensions are a type of personal pension but differ in as much as they are required to meet a number of conditions which are set out in government legislation. Apart from those conditions, stakeholder pensions provide the same benefits as other money purchase schemes.
In a stakeholder pension, the fund management charges are capped: for the first ten years, the annual management charge can be no more than 1.5% of the pension fund’s value. After year ten, the annual management charge reduces to no more than 1% a year.
The fund holder also has the right to switch to a different pension provider without incurring a charge from their existing provider. The manager must be prepared to accept contributions of as little as £20 paid weekly, monthly or at less regular intervals and the plan holder can stop, re-start or change their contributions whenever they wish and without the imposition of any penalty fees for doing so.