Similar to Personal Pensions, Stakeholder pensions are defined contribution plans that are reliant upon the level of contributions made to the plan, the investment growth achieved and the charges applied to the plan.
Stakeholder plans were launched in April 2001 to encourage individuals to make long-term savings for retirement by installing greater consumer confidence and transparency of charges.
Stakeholder plans have to adhere to several conditions such as a cap on charges, low minimum monthly contributions and the ability to stop and re-start contributions.
A stakeholder pension has the same limits and tax treatment as a personal pension but is subject to certain minimum standards relating to charges and investment options. Stakeholder pensions are designed to be simple to understand and decision trees have been produced by the FSA to help you should you require further advice with regards to these types of pension plans.
A stakeholder plan is subject to a maximum annual management charge of 1.5% reducing to 1% after 10 years.
Again, all assets held within a Stakeholder plan can be invested in OEIC or Unit Trusts to achieve long-term growth. However, due to the low cost structure we tend to see limited fund ranges for these plans.
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