Occupational Stakeholder Pensions

Many employers offer stakeholder pension schemes to their employees, and in fact, all employers with 5 or more employees have a legal obligation to provide a stakeholder pension scheme if they do not already offer access to a good value company pension arrangement. Some employers will make contributions to the scheme on top of any contributions you make yourself (typically known as 'employer-sponsored' schemes).

Eligibility

To join your company's stakeholder pension scheme, you must:

Be over 18.
Be more than 5 years away from the scheme's maximum retirement age.
Have worked at that company for at least 3 months.
Earn more than the minimum required to pay National Insurance contributions for 3 consecutive months.

However, your employer does not have to offer you access to a stakeholder pension if one of the following apply:

You are able to join a company (occupational) pension scheme.
You are able to join an alternative personal pension scheme where your employer pays in an amount equal to at least 3% of your pay.

Conditions of Occupational Stakeholder Pensions

£20 minimum contribution.
Can transfer in to and out of scheme or stop payments without penalty.
An employer can make it a condition of their contributions that the employee also contributes.
Total employee/employer contributions must be within permitted contribution levels.
Employer must offer payroll deduction facility.
Employer must record contributions made.
Administration costs are deducted from the pension fund.
Annual charges capped at 1% of funds.

If you take up an occupational stakeholder pension scheme, your employer is obliged to supply you with an annual statement of all contributions and the pension's current value, as well as supply a forecast of what the pension could potentially be worth when you retire.

Pros and Cons of Occupational Stakeholder Pensions

Pros

Flexible.
Low charge.
Portable.
Easy to understand.
Option to take a tax-free lump sum at retirement.
Employer and employee get tax relief on contributions.
Maximum contributions can be calculated according to net earnings made in any year, up to a maximum of 6 years ago.
Employees contracting out of the State Second Pension (formerly SERPS) get a National Insurance rebate paid into the pension and tax relief on contributions.