Personal or stakeholder pension?

Question

Which of the 2 is better? I don't want to work until I am 65, I would ike to enjoy life before I die, but I know a pension is a necessity for later life. Please can anyone tell me how each one works, and what the pros and cons are. Thank you.

Answer 1

Whichever one the Company you work for will contribute to the most - if you can't get Company contributions (Stakeholder), I suggest go for a low cost SIPP (Self Invested Personal Pension) and select Index-tracker funds.

A number of SIPP providers offer 'zero annual fees' and 'zero contribution fee'.. choose one of these (the dealing costs will be higher than the ones that charge annual fees, however since you won't be doing much dealing it will work out cheaper in the long run - and if you do start buying & selling shares, you can always move your SIPP first) ..

Avoid any that charge you for making contributions .. if you put money in monthly, it's NOT a good idea to get ripped off £10 (+VAT) each time.

NB> Right now you can contribute your entire annual salary into you SIPP and get your TAX BACK - for sure it's worth putting in enough to get back every penny of Tax at 40% you pay

(Gorden is going to notice no-one pays 40% tax very soon.. and when he does he'll put a stop to it, so pile the cash in now whilst you still have the chance)

Answer 2

Personal pensions and stakeholder pensions are almost identical. Each offers tax relief on the contributions, which means that a £100 premium costs £78 for a basic rate tax payer and £60 for a higher rate tax payer.

At retirement age 55, you can take 25% of the fund as tax free cash and the remainder needs to provide you with an income for your lifetime and if you wish, for your spouses's lifetime as well.

Stakeholder pensions have to confirm to certain issues on charges and access. They are not allowed to charge an annual management charge of more than 1.5% in the first 10 years, then 1% thereafter. Also if you want to transfer your pension to another provider or take early retirement there will be no penalties for doing so. Since there are restrictions on charges, you also get less choice of how to invest your money.

A personal pension, on the other hand, has no charge restrictions and consequently has a much wider range of investment options. That said, most good personal pensions are almost the same price as a stakeholder. My favorites are Scottish Widows and Axa. For the ultimate in investment choice, you could consider a low cost SIPP.

Disclaimer:
The answers above are for guidance only and should not be acted upon without you receiving independent financial advice relevant to your circumstances. To find an IFA, please call 0800 085 3250 or go to http://www.unbiased.co.uk

Answer 3

A stakeholder pension is a personal pension. They were set up in 2001 for individuals on low earning who worked for agencies that did not have their very personal pension scheme. Does your organization have a pension scheme. if so communicate the organization scheme with them. this is a robust thanks to pass because the organization will pay in money besides as your self. they'd or received't have someone to recommend different strategies of paying right into a pension. once you do not have any organization scheme pass to a financiel consultant.