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Always remember that investments can go down as well as up in value, so you could get back less than you put in. How you are taxed will depend on your circumstances, and pension and tax rules can change.
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A stakeholder pension is a type of personal pension that must meet minimum standards set by the government.
These minimum standards include:
Due to their flexibility, stakeholder pensions can be of particular benefit if you’re self-employed, on a low income, or not working.
You can get a stakeholder pension from pension companies, investment platforms, insurance companies, or high street banks.
Your employer can also arrange your stakeholder pension. If a stakeholder pension is provided through your employer, they will have chosen the pension provider and might also arrange for contributions to be paid from your wages or salary. In most cases, your employer will also contribute to your pension pot.
See: Workplace Pension Scheme - Auto Enrolment
Advantages of Investing in a Stakeholder Pension
Disadvantages of Investing in a Stakeholder Pension
The government will add money to your pension contributions in the form of tax relief (free money).
For every £80 you pay into your pension, the government adds £20 - and you can claim an extra £20 if you are a higher earner.
You can think of tax relief as a refund of the tax you originally paid on your pension contribution at your usual rate of income tax - 20%, 40%, or 45%.
It is your pension provider that claims this tax relief at the basic rate and adds it to your pension.
Tax relief for higher-rate taxpayers is slightly different. If you are a higher-rate taxpayer, you will need to claim the additional rebate through your tax return. Alternatively, if you are claiming a large sum, a phone call or letter to HMRC should do the trick.
We’ve compiled a list of the best stakeholder pension providers in the UK.
Please remember that when you invest, your capital is at risk. You usually can’t access the money in your pension until you are at least 55 years old (increases to 57 in 2028), when you can take 25% as a tax-free lump sum. Other pension and tax rules apply.
The stakeholder pension providers listed below are all authorised and regulated by The Pensions Regulator.
Here are the best stakeholder pension providers in the UK:
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The Aviva Stakeholder Pension allows you to invest your money in a range of funds that give you access to various assets such as stocks, shares and property. You will also be able to choose from a range of high to low-risk funds, depending on your attitude to risk.
With Aviva, you can start your Stakeholder Pension with as little as £20 a month and pay money into your pension plan either regularly, e.g. every month, or make one-off payments. You can also change that amount or stop and start payments when you need to. When you reach the retirement age of 55 (57 from 2028), you will have a number of options about how you can use your pension savings, including taking an income, lump sum or a combination of both. The Aviva Stakeholder Pension also lets you create a pension pot for your children or grandchildren. You can deposit up to £2,880 for each child per year.
With Aviva, you pay only an annual fund charge, which is capped at 1%. You will not have to pay any charges for setting up your investment or for switching money between funds. Aviva offers financial advice at a separate fee. Visit Aviva to learn more.
Please note: When you pay into a pension, your capital is at risk.
The Standard Life Stakeholder Pension allows you to invest your money in 30+ funds and 2 Lifestyle Profiles. You can invest in up to 12 funds at any one time, but if you decide to pick a Lifestyle Profile, you can only combine this with a with-profits fund.
The Lifestyle Profiles are ready-made investment portfolios that invest your money in funds and move them as you get closer to retirement to try to get you the best possible returns for your goals. If you do not want to choose a fund, Standard Life will automatically invest your money in a Lifestyle Profile depending on goals and risk preferences.
Standard Life charges an annual management charge of 1% of the value of the funds you are invested in each year. Visit Standard Life to learn more.
Please note: When you pay into a pension, your capital is at risk.
Yes, stakeholder pensions are still available. You can get a stakeholder pension from companies like Aviva and Standard Life.
You can pay 100% of your earnings into your stakeholder pension every tax year up to a maximum of £60,000. The £60,000 limit is your annual allowance, and it is the maximum amount you can pay into any pension in one tax year and benefit from tax relief.
You usually can’t cash in your stakeholder pension pot before you’re 55 years old (increases to 57 in 2028), but there are some rare cases when you can, e.g., if you are too ill to work or if you have a severe illness which means you’re expected to live for less than a year.
In the case of the State Pension, the earliest you can get that is when you reach your State Pension age. If you’re currently aged between 20 and 39, your State Pension age will likely be 68. If you retire before this age, you’ll have to wait to claim your State Pension.
Here are the best pension providers in the UK:
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