The stakeholder pension works in much the same way as the personal pension. The way in which they differ is that the stakeholder pensions by law, must meet a number of minimum standards to make sure they offer value for money, flexibility and security.
These standards include:
- Low charges – managers of the fund can charge fees of up to one and a half per cent of your pension fund each year for the first 10 years and thereafter up to one per cent.
- Flexibility – the ability to switch to a different pension provider without charge, start contributions from £20, paying weekly, monthly or less regularly and stop, re-start or change your payments whenever you want.
- Security – the scheme will be run by trustees or an authorised stakeholder manager, who will make sure that the scheme meets the various legal requirements.