Guide to Pension Comparison with Personal Pension Plans
Today, there are such a number of options available to you when you want to start your pension fund that carrying out a pension comparison is an inevitable part of the decision making process.
Pension Comparison
Of these options, the stakeholder pensions are one of the more recent schemes to be introduced. Before you decide to sign up for a stakeholder pension scheme it is important for you to understand what it is and how it works.
Comparing it with the personal pension scheme, the workhorse of the pension market, helps you understand its advantages in a better way.
An Introduction to Stakeholder Pensions
The stakeholder pension scheme first made its appearance in mid 2001 as the perfect scheme for those earning a moderate income. But soon after its introduction, the government announced that the scheme would suit people of all earnings levels.
These schemes offer great flexibility, are secure and affordable. Your contributions to the stakeholder pension plan are invested in various avenues to create a retirement fund for your golden years.
How is it Different from Personal Pensions?
The law requires pension providers to adhere to certain stipulations with their stakeholder pension schemes. Several minimum standards have been clearly outlined by the government to ensure that these schemes allow the contributor to have the greatest flexibility and best value for his hard earned money.
But the most important difference is that stakeholder pensions are low cost options when compared to most personal pension plans.
Pension providers are restricted in the kind of fund management fees they can charge for taking care of your stakeholder retirement fund. The government restricts these charges to a yearly 1% of the total value of your pension fund. The charges are debited from your pension scheme directly by the provider. In addition, stakeholder funds come with zero initial charge unlike many other schemes.
Other Advantages of Stakeholder Pensions
- Stakeholder pension funds are typically invested in a range of stocks or shares, property or even cash equivalent investments. You have greater flexibility with these schemes to choose your investment portfolio in line with your risk appetite.
- The option of taking out 25% of the net value in the form of a tax free lump sum at retirement helps you pay off your debts and enter your retirement period obligation free. The rest of the fund can be used to purchase pension annuities so that you have a regular income to depend on during retirement.
- Typically, stakeholder pensions allow you to take benefits in many different ways in line with your preferences. Pension release at age 55 is also possible with stakeholder pensions.
- You can make regular contributions to this pension scheme and also add lump sums into it when you receive some extra cash. This lets you maximize the savings that you can set aside for your retirement without putting you under financial strain throughout your career.
It is surprising that stakeholder pensions have not yet become the number 1 scheme for people across the UK.
But this can be attributed to ignorance about the scheme rather than any drawbacks with the scheme itself. If you have decided to start your pension fund, carry out a pension comparison between these and other plans to see how stakeholder plans can be your best choice.
Stakeholder pensions are affordable, flexible and secure ways to build your retirement nest egg.
In recent years there have been significant reductions in charges and that mean that many people still have old type structures which are expensive, not to say poor performing. It should cost nothing to find out and if you do not compare yours with what is available, how will you know if your pension is working for you as well as it could?
Our advice process is always to gather a full understand our clients needs, circumstances and aspirations together with detailed analysis of any existing arrangements and make written recommendations before any decisions or actions are taken.
