Stakeholder pension schemes were introduced in the
UK on 6 April 2001 as a consequence of the
Welfare Reform and Pensions Act 1999
Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
. They were intended to encourage more long-term saving for retirement, particularly among those on low to moderate earnings. They are required to meet a number of conditions set out in legislation, including a cap on charges, low minimum contributions, and flexibility in relation to stopping and starting contributions. Employers with five or more employees are required to provide access to a stakeholder pension scheme for their employees unless they offer a suitable alternative pension scheme. The features of stakeholder pensions were intended to make them cheaper to sell than existing personal pensions and to provide a more transparent and attractive saving vehicle.
Although many stakeholder pensions have been taken out, they have largely not been successful in encouraging lower earners to save more. The government announced in May 2006 that it proposed to introduce a new pension scheme called
Personal Accounts
The National Employment Savings Trust (Nest) is a defined contribution workplace pension scheme in the United Kingdom. It was set up to facilitate automatic enrolment as part of the government's workplace pension reforms under the Pensions Act 2 ...
, and later renamed
NEST prior to its introduction.
Definition
As described on
nidirect.gov.uk website "A stakeholder pension is a money purchase pension provided by a bank, building society or insurance company. Trade unions may also offer stakeholder pensions to their members. You pay money to your pension to build your pension fund.
The pension provider invests the pension fund on your behalf. The value of your pension fund will be based on how much you have contributed and how well the fund's investments have performed.
It is best to make regular contribution payments if you can. But you can stop payments for a while if you need to without it costing you anything. However, that will mean you have a smaller pension fund unless you make extra payments later.
When you reach the age when the stakeholder pension can be paid, you can use the fund you have built up to buy an annuity. This is a regular income, payable for life, which you can buy from a life insurance company."
See also
*
Pensions
A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...
*
Personal pension schemes
External links
Directgov - Stakeholder pensionsHM Revenue & Customs - Stakeholder pensionsBBC Pension Guide
{{DEFAULTSORT:Stakeholder Pension Scheme
Pensions in the United Kingdom