A stakeholder pension is a type of personal pension, meaning that you can set this up yourself and it can be independent of your state pension.

Stakeholder pensions are sometimes classed as private pensions too. You can purchase this type of pension from most pension providers, banks or insurers. 

How do stakeholder pensions work?

Stakeholder pensions are primarily a hands-off investment – many people with stakeholder pensions allow the provider to choose where their contributions are invested. 

The provider often spreads out your stakeholder pension contributions between stocks and shares which aim to help your pension grow. Of course, you can have more control over the investment strategy if you want, but most people choose to let the provider handle this.

However, ultimately, there is no guarantee that investing in a stakeholder pension will be beneficial to your final pension pot

When can I access my stakeholder pension?

You can access the funds from your stakeholder pension from the age of 55, or when you retire – whichever comes first.

Benefits of a stakeholder pension

There are two main benefits to stakeholder pensions.

Stakeholder pensions are flexible in terms of how you invest your contributions, but they also allow affordable weekly or monthly payments as low as £20. 

You can even contribute a lump sum at any point – there’s no obligation to make weekly or monthly payments. This makes stakeholder pensions ideal for those who are self-employed or on a low income. 

Setting up a stakeholder pension

We’ve already established that you can set up your own stakeholder pension. You can do this by simply approaching a pension provider, bank or insurer of your choice.

However, some companies do offer a stakeholder pension to their employees. 

If your employers offer a stakeholder pension, it’s likely that they will have already chosen the provider and will give you the option of making regular contributions from your wage or salary. 

This can be a great way of building up your stakeholder pension as it takes away the responsibility of making regular payments yourself, and you can treat it as another form of tax that’s deductible from your salary, for example. 

Who else can contribute to my stakeholder pension?

In theory, anyone can add to your stakeholder pension, and you can add to anyone else’s.

Often, the main reasons for contributing to someone else’s stakeholder pension is to help build a pension that belongs to your partner, or even to your child.

However, some employers will also add to your stakeholder pension if they have set it up for you as an employee benefit, for example.