Stakeholder Pensions Guide

Scottish Life Stakeholder Pension

FAQs for Employees

  1. What are stakeholder pensions?
  2. Can I join a scheme before April 2001?
  3. What if I cannot afford to contribute a large amount to my pension?
  4. Can I have a stakeholder pension as well as my personal pension?
  5. Can I have a stakeholder pension as well as my occupational pension?
  6. Will the self- employed or those without an employer be included in these arrangements?
  7. Where do I go to find out more?

Answers


1. What are Stakeholder Pensions?
  • Stakeholder pensions are low cost, affordable pensions aimed particularly at the estimated five million people who currently do not have the right options available to save for their retirement.
  • Stakeholder pensions will be available from April 2001.
  • The main target group is those earning between £10,000 and £20,000 a year although they may also interest higher earners and non earners.
  • Stakeholder pensions will have to meet a number of minimum standards to ensure they offer value for money, flexibility and security.
  • Charges for membership of the stakeholder pension scheme must be limited to no more than 1% per annum of the value of the fund.
  • No extra charges can be made if the member stops paying in, or wishes to transfer to another scheme.
  • Additional charges may only be made in respect of other optional services offered by the scheme, which are subject to separate contract.
  • Schemes must provide information and explanatory material to potential members, but will not be required to offer individual financial advice within the 1% charge. Schemes may provide individual advice within the charge limit if they wish, or charge a separate fee. ·
  • For the first year, existing rebate rates for Contracted-Out Money Purchase Schemes and appropriate personal pensions will apply to stakeholder pensions as well. There will be a full review of rebates before the introduction of the State Second Pension.
  • A Stakeholder scheme can be established under a trust. A stakeholder scheme may also be established where there is a contract between the manager of the scheme and its members. The arrangements for the authorisation of scheme managers will be set out by the Financial Services Authority.

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2. Can I join a scheme before April 2001?

No. However, the proposals for stakeholder pension schemes have already had encouraging effect on the pensions market, with many personal pension providers beginning to offer more favourable terms, in particular with regard to charges and transfer arrangements.

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3. What if I cannot afford to contribute a large amount to my pension?

You can join a stakeholder pension scheme with a minimum contribution of £20 and make payments of that amount, or more.

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4. Can I have a stakeholder pension as well as my personal pension?

Yes – you can have any number of stakeholder and personal pension schemes as long as you do not exceed the overall contribution limit. The overall contribution limit is the higher of £3,600 or the existing earnings and age related personal pension limits.

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5. Can I have a stakeholder pension as well as my occupational pension?

This depends on what type of scheme your occupational pension scheme is. If you are in a defined contribution occupational pension scheme, and your employer has opted into what is known as the new defined contribution tax regime, you can join a stakeholder scheme as well provided the contributions by you and your employer do not exceed the maximum allowed.

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6. Will the self- employed or those without an employer be included in these arrangements?

Yes they will be able to take out stakeholder pensions.

They will need to approach pension providers directly.

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7. Where do I go to find out more?

Further information on stakeholder pensions is included on the DWP and HMRC websites.

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