Stakeholder pensions

Stakeholder pension schemes are low-cost pensions meant for people without existing private pension arrangements. They were originally targeted at people who earn more than £10,000 a year and who cannot join an occupational pension scheme. They have, however, turned out to have much broader appeal.

Main conditions for a stakeholder pension

A stakeholder pension is a particular type of personal pension which satisfies a number of minimum government standards, principally the following:

  • The only charge permissible is a charge on the value of each member's funds, which must not exceed 1.5% a year (see note below)
  • Members of a SPS must be able to transfer in or out without any extra charge
  • Each contribution can be as little as £20

Note: The only charge permissible is a charge on the value of your funds, which must not exceed 1.5% a year for the first 10 years, which then reduces to 1%. For policies before 6 April 2005, the maximum charge of your fund value is 1%.

Employer exemption

The conditions for exemption from providing stakeholder access are as follows:

  • Employing fewer than five people
  • Offering an occupational pension scheme (OPS) that all staff can join within a year of starting the employment
  • Offering access to a personal pension scheme which meets specified conditions

Employee exemptions

Stakeholder access does not have to be provided for any employee who:

  • Has been in the employment for less than three consecutive months
  • Is a member of the OPS
  • Is barred from membership of the OPS if under 18 or within five years of the scheme's normal pension age
  • Could have joined the OPS but decided not to
  • Has earned below the lower NI limit for at least three consecutive months

Providing access

In order to meet their responsibilities, employers who are not exempt must:

  • Choose a registered SPS from the register held by the The Pensions Regulator. The register can be seen on their website at Pensions Regulator
  • Consult and inform your employees accordingly
  • Make available arrangements to deduct contributions from the pay of those employees who choose to pay into the SPS
  • Send contributions to the SPS provider within given time limits and record these payments

Do contact us if you would like further help or advice on this subject.

View our online calculators >

We have a range of calculators to help you to check and plan your finances

Read our limited companies guide >

It’s totally free, and gives you advice and guidance around setting up as a contractor or freelancer.