Stakeholder Pensions UK
Charges / Cost of Stakeholder Pensions UK
The biggest difference with the old style UK personal pensions is that there are no initial charges – they’re the upfront rip off that goes straight into someone else’s pocket.
The annual charges are limited while there are no penalties for switching funds or providers.
However some personal pensions have changed and are now offering stakeholder-style charging as well. But, surprise, they won’t refund what they have taken in the past.
For example, if your pension fund is £1,000 you would pay £10 a year. Personal pensions used to cost about 5% a year! Added to the effect of often poor investment growth, this meant savers were rarely happy with the results. Your fund could fall.
What happened to the 1% limit?
When stakeholder was introduced, many advisers and insurance companies squealed. They said they could not possibly offer advice on 1% charges as there was nothing in it for them.
Now, if you’re cynical, it was all that so-called advice that got pension firms in the huge mis-selling mess of the 1990s!
But their voices turned out to be more powerful than that of consumers so now the limits are 1.5% for the first ten years of any money you put in. After that, it goes down to a maximum 1%.
The good news is that it is still possible to find many providers who charge less than that. Some also reduce the percentage once your fund reaches a certain size.
Stakeholder schemes start at £20 a month. And, more good news, they are not allowed to charge you if you have to stop paying in for any reason.
Stakeholders and Occupational Pensions
If you are in an Occupational pension scheme then you can contribute to a stakeholder at the same time as your occupational pension ie in parallel.
You’d need to ask an IFA exactly how much you could be putting into both. In some cases, your occupational pension may be so good that you don’t need to save more!
And in other cases, extra savings would be better through the workplace Additional Voluntary Contribution (AVC) scheme
Any organisation with more than 5 employees has to provide a stakeholder pension scheme for their employees.
However, as with existing occupational pension plans, they don’t have to make contributions themselves. So that’s not worth a lot, is it?
It may turn out that all that this means for an unconcerned employer is they may only have to invite a pension provider over to talk to the staff.
If you want to discuss any of this with an IFA we can put you in contact with one. See Find me an IFA