Who should take out a stakeholder pension?

Stakeholder pensions are available to almost everybody in the UK, including people in employment, fixed contract workers, the self-employed and people who are not actually working but can afford to make contributions. It's also possible to contribute to someone else's stakeholder pension - for instance someone can make contributions to their non-working partner's stakeholder pension scheme on their behalf.

How much can I contribute into a stakeholder pension?

It is possible to invest up to £3,600 (including tax relief) in a uk stakeholder pension scheme each year without evidence of earnings. However, under certain circumstances the maximum level of pension contributions may be increased for people with earnings according to their age and earnings level.

People who are already a member of an occupational pensions scheme may also pay up to £3,600 a year into a stakeholder pension scheme, providing their P60 earnings do not exceed £30,000.

I am not earning - can I contribute to a stakeholder pension?

Yes, you can make contributions of £3,600 each tax year irrespective of earnings.

Do I get tax relief on my contributions?

Yes. You pay contributions net of basic rate tax (currently 22%) and the stakeholder pensions provider reclaims the tax from the Inland Revenue. Higher rate tax relief can be claimed through your self-assessment tax return after the end of the tax year.

Will I get tax relief even if I am a non-taxpayer?

Yes, all contributions from individuals will be paid net of basic rate tax.

Do my contributions have to be on a monthly basis?
No, you can make contributions whenever you want as long as each contribution is at least £20

Can I reduce or stop my contributions?
Yes. You can change your contribution amount or rate without being charged (subject to the minimum level of premium). However, if you are paying your contributions through your employer you may only be able to change the amount every 6 months, though you can stop making contributions at any time.

Can I have my contributions back if I change my mind?
No. There is a cooling-off period of 14 days when you first join the scheme. Once this has expired the contributions cannot be returned to you. They must be used to provide benefits, which can be taken anytime between 50 and 75. Benefits can be paid earlier in the event of death and may also be paid earlier in case of serious ill health.

How will my money grow?
You can opt to invest your money into a number of funds with Standard Life including the stockmarket, property, cash and gilt funds. If you do not specify a fund, Standard Life will enter you into their default Stakeholder Fund.

How and when is my pension paid?
You can draw your pension any time between your 50th and 75th birthday, the money you have contributed to your pension fund is used to purchase an annuity. An annuity is an arrangement by which a life insurance company pays you a regular income, usually for life, in return for a lump-sum premium. However, you cannot buy an annuity before age 60 with the part of your pension fund that has been built up from rebates of National Insurance contributions (if you contracted out of the State Second Pension, S2P).
You are not obliged to buy an annuity from your stakeholder provider so you can shop around to compare what other companies have to offer.

Under current tax legislation, at retirement you may take 25% of the value of your fund as a tax free lump sum, the remainder is then used to purchase an annuity (this does not apply to S2P Contributions).