Guide to Personal Pension

Main types of personal pension

Stakeholder and personal pensions
These are money purchase pensions and are the most popular choice for people who arrange their pensions privately. Financial institutions (insurance companies for example) usually run these schemes. We call them 'pension providers'.
Some employers also offer stakeholder and personal pensions to their employees.

What is a Stakeholder or Personal Pension
A Stakeholder or Personal Pension Policy is an individual money purchase type of pension. The main difference between the two is that Stakeholder Pensions have very strict rules as to the charges and flexibility of the scheme. If you are not a member of a company pension scheme and you have another pension it is likely you will have one of these pensions.
Insurance companies provide them and most people pay a monthly amount into them via their bank account. However, it is possible to pay a "one off" single payment in the form of a lump sum or transfer value from another scheme.

Flexible
Stakeholder and Personal Pension Policies are designed to be more flexible than company pension schemes as it is your own policy and the government therefore recognises people will have their own individual desires, which would be difficult to account for in a company scheme with 20,000 members! Although under a personal scheme you have more scope to meet your requirements, the Inland Revenue still place strict rules on the contributions you can make and also the benefits you can receive when you come to retire. It is therefore important to maximise the benefits you have and ensure your investment reaches its full potential to provide you with the best possible pension come retirement.

This site is for information only and does not constitute financial advice.