What is a Stakeholder or Personal Pension

A Stakeholder or Personal Pension Policy is an individual money purchase type of pension. The main difference between the two is that Stakeholder Pensions have very strict rules as to the charges and flexibility of the scheme. If you are not a member of a company pension scheme and you have another pension it is likely you will have one of these pensions.

They are provided by insurance companies and most people pay a monthly amount into them via their bank account. However, it is possible to pay a "one off" single payment in the form of a lump sum or transfer value from another scheme.

Flexible

Stakeholder and Personal Pension Policies are designed to be more flexible than company pension schemes as it is your own policy and the government therefore recognises people will have their own individual desires which would be difficult to account for in a company scheme with 20,000 members! Although under a personal scheme you have more scope to meet your requirements, the Inland Revenue still place strict rules on the contributions you can make and also the benefits you can receive when you come to retire. It is therefore important to maximise the benefits you have and ensure your investment reaches its full potential to provide you with the best possible pension come retirement.

Some people seriously consider the implications of death before retirement and a personal pension option could be beneficial as a single persons estate would receive the whole fund value paid back as a lump sum, a married person spouse would receive a pension and some of the fund as a lump sum. When you retire a personal pension will usually allow you to take 25% of the relevant fund as a Tax Free Cash lump sum, this could be useful if you want to treat yourself to a new car or holiday home during your well-earned rest.