Notes

Further information

The minimum standards

Stakeholder pensions must meet the standards laid down by the Government.

The standards include:

• Charges
  Providers of stakeholder pensions usually charge for managing your money. There is an upper limit of 1.5% of the value of your fund each year for the first 10 years (so on a fund value of £10,000, the maximum charge is £150 a year), which then reduces to 1%.
  
  But if you started your stakeholder pension before 6 April 2005, the maximum that you can be charged is 1%. If you took out a stakeholder pension before 6 April 2005, it may be cheaper to continue contributing to it rather than take out a new stakeholder pension.
• Flexibility
  You can contribute regularly or occasionally. It is always best to make regular weekly or monthly contributions but you can change the amount. You can pay in as little as £20, and you can stop paying in without having to pay any penalty, and restart later.
  
  If you are employed and your employers provide a stakeholder pension, they may, if you wish, deduct your contributions direct from your pay and put them into your pension fund.
  
  You can take your stakeholder pension with you when you change jobs. You can switch to another stakeholder pension at any time if you want to, without having to pay any charges for the transfer.
• Information
  Your stakeholder pension provider must give you regular information about your fund. This will include an annual statement to let you know how much you have paid in and how your fund is growing. It will also include a forecast of how much your pension could be in today’s prices. Look out for this forecast – it’s called a Statutory Money Purchase Illustration – which is updated each year and will help you decide whether you are making enough provision for your retirement.
• Investments
  But one thing you must understand is that the minimum standards do not necessarily mean that your money is protected. The performance of your stakeholder pension depends on the type of investment fund you choose and how those investments perform. Remember that investments linked to the stock market can fall as well as rise.
  
  You don't have to make decisions about how your contributions are to be invested. Stakeholder pensions must provide what is called "lifestyling" for anyone who does not want to make a choice. Lifestyling means that at least five years before retirement your pension savings will start to be moved into less risky investments. This will help to guard against falls in investment value as retirement approaches. You can, however, choose to turn off the lifestyling before it begins.