Alternative Pension Schemes

Any form of long-term investment is suitable for retirement saving. However, stakeholder and personal pensions provide unique tax advantages. However, all pension arrangements tie up your savings until at least age 55 rising to 57 by April 2028   and restrict the way you can take the benefits. So, should you want more flexibility, choose alternative saving scheme, such as individual savings accounts (ISAs) which combine flexibility with tax advantages.

Why choose a personal pension rather than a stakeholder scheme?

The government introduced stakeholder pension schemes on 6th April 2001, in response to the lack of good-value pension plans available to people who could not join an occupational pension scheme through their work.  Stakeholder pensions were initially brought in to encourage more long-term saving for retirement, particularly aimed at people who were low to moderate earnings.  In the past, the only alternative if there was no scheme at work or if you were self-employed has been personal pensions that have consistently been found to be inflexible and expensive, at that time.

Charges were complicated, and some of the worst plans could use up 40% of your pension fund in charges by the time you retired. Typically, if you switched to another provider, you would face hefty penalties for stopping your old plan.

Why would anyone want a personal pension when they can have a lower charging, more flexible stakeholder scheme?

  • Investment choice: Low stakeholder charges will limit providers’ scope to pay expensive investment managers to run the pension funds. As a result, stakeholder schemes might offer only a limited choice of investments, focusing in     particular on tracker funds. If you want a big selection of different investment funds, a personal pension might be the better option. If you want a self-invested scheme, personal pensions are likely to be the only option.
  • Investment information: Because stakeholder pensions are designed to be straightforward, they generally only include low-medium risk investment funds, meaning that your potential returns could be a lot lower than if invested within another type of pension plan.
  • Group personal pension schemes (GPPS): If you have a personal pension taken out through a GPPS at work, your employer may be contributing to the plan on your behalf, or you may get special terms. These could outweigh any disadvantages vis-à-vis stakeholder schemes.
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You can also request contact details from the Pension Tracing Service by phone or by post.

The Pension Tracing Service
Telephone: 0800 1223 170
From outside the UK: +44 (0) 1782 389134
Monday to Friday, 9:30 am to 5:00 pm

The Pension Tracing Service
The Lantern
High Street
EX34 9QB

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This service is not affiliated with the Department of Work and Pensions or any government body. The Pension Tracing Service does not offer financial advice to our clients. However we can allocate you an Authorised and Regulated Pension Specialist.

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