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Ensure a life you can look forward to by investing in a pension

According to the Office for National Statistics (ONS), just 8.3 million people are saving into a workplace pension

Choose a personal or private pension for wider choice and increased flexibility

Stakeholder Pension

Stakeholder pensions are a type of personal pension, introduced by the government in 2001 as a flexible, cheap and simple way for people to provide for their own future and save for retirement.

The good thing about stakeholder pensions is the rules that the government has applied to them to ensure that they remain flexible with clear terms and low charges, making them good value for money.

You can start a stakeholder pension whether you are employed or unemployed and it's never too early to start, parents, grandparent and other family and friends can start a stakeholder pension on behalf of a child to ensure their future is financially secure.

How it works

In this type of pension you pay into a pension fund and this money is then invested on your behalf. When you reach retirement age, the value of your fund will depend on how much you have contributed and how well the fund's investments have performed.

This type of personal pension is flexible as you are able to choose the amount of contributions you make and can even halt payments completely if you need to. Plus you can start to draw your pension at any time from the age of 55 and you can start contributions from as little as £20 and pay weekly, monthly or even less regularly. Rules imposed by government state that providers cannot charge an annual management charge (AMC) of more than 1.5% a year in the first 10 years and 1% thereafter.

Is it right for you?

Stakeholder pension schemes are great for individuals who are not signed up to a company pension scheme via their employer; so if you are self-employed, your employer does not currently run a scheme, or are not currently in work, but can afford to put some funds away for retirement, then a stakeholder pension may be a good option to consider?

Personal Pension

Very similar to a stakeholder pension, personal pensions were introduced by the government in 1998 to encourage people to save for their retirement through contributions, investment returns and tax relief. Unlike a stakeholder pension, the annual charges taken by your pension provider are not as limited and this will affect the final amount of the pension fund.

How it works

Funds you place into your personal pension are managed for you and you may choose from a variety of investment offers provided by the pension company you choose. Investments can be 'with profit' or 'unit-linked' and often an externally managed investment company will be recruited to offer increased investment expertise. Types of investment include:

  • Risk-based (managed) funds (cautious, aggressive, balanced)

  • UK and overseas equity funds

  • Gilts and fixed interest (bond) funds

  • Cash funds

  • Index Tracker funds

  • Green/Ethical funds

  • Property funds

A personal pension provider may request a set up charge of up to 5% and then an AMC of 0.5-1.5% to allow for management and administration of your fund. Personal pensions may be tiered so that as the fund grows, the cost of the AMC drops.

Is it right for you?

Which type of investment you should choose depends on your attitude to the risk involved and a financial adviser will be able to help you to establish this. It is possible to switch between types of investment over the period in which you have the pension scheme, although some providers may make a charge for this service. Benefits from a personal pension may be drawn anytime between 55 and 75 years of age.

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