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Introducing the stakeholder pension
The big change to private pensions is the introduction of the new stakeholder pension. It is now possible to register a stakeholder pension scheme and contributions can be made into a stakeholder scheme from April 2001. Personal pensions and occupational pensions will continue to be available, but the addition of the new stakeholder pensions will have an impact on many existing schemes.
A stakeholder pension may be set up either on a trust basis or on a contract basis, with a stakeholder manager. |
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1. Trust Basis
If the stakeholder is set up as a trust, trustees must be appointed and will have to carry out their duties in much the same way as the trustees of an occupational pension scheme. Some employers may wish to set up their own stakeholder schemes under trust, but if they do, they will have to take on the duties and requirements of trustees. |
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2. Contract Basis
Alternatively, a stakeholder scheme can be set up on a contract basis by a stakeholder manager. This is very similar to the legal basis of personal pensions and most existing personal pension providers will want to set up stakeholder schemes in this way.
Stakeholder pension schemes must meet certain minimum standards laid down by the DSS. The most important of these are:
- A stakeholder pension can only make a single charge. The annual charge must be based on the value of the member's fund and can never be more than 1% of the value of that fund.
- The minimum contribution cannot be set any higher than £20 and members may stop, start or vary contributions whenever they like and without penalty.
- If a member chooses to move to another pension arrangement, the stakeholder plan is not allowed to impose any financial penalties on the transfer.
Schemes that do not meet these standards can continue to be sold, but they cannot be described as stakeholder schemes. |
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