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?

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