What’s a Pension?
Stakeholder Pension
If you are self-employed or not earning a stakeholder pension is probably a good option to consider. For those who don’t have a good company or personal pension then it’s also worth considering what this type of pension has to offer.
With stakeholder pensions the money you save is placed with investments on your behalf. Once this fund matures it is then used to buy an annuity from an insurance company which is what will give you a regular income when you retire. Therefore Stakeholder pensions are known as ‘money purchase’ pensions - ie they are not linked to your earnings.
Stakeholder pensions must meet Government standards to ensure they offer value for money, flexibility and security.
Therefore…
- The charges are capped – the pension fund provider is limited as to how much they can charge you
- There are low minimum payments
- You don’t need to be working to save in one
- You get Tax Relief: The Government will contribute an extra £22.00 in Tax Relief for every £78.00 you place into your Stakeholder Pension if you are a basic rate Tax Payer (22%).
- You get more flexibility - there are no penalties for missing a payment, you choose how often and when you wish to pay.
- Family members or partners, as well as employers can also contribute to help you save for when you retire.
Pensions summary
There we have it then - a reasonably comprehensive overview of what can be a very complex subject. Hopefully, this article will have given you a basic understanding of what pensions are and how they may benefit you with regards to planning for your own retirement. The important thing is to begin today - the longer you leave the planning process the more money you will need to find to fund a retirement income level that you’d be comfortable with. You’ll also have less time you’ll have left to do it in.
To explore the unique issues which face you personally it’s wise to seek Independent Financial advice before making any long term decisions regarding which pension choices would suit you best.
Contact Independent Pensions Specialist William George by clicking here.