Opening and contributing to a pension scheme is one of the best ways to save for retirement. If you have a workplace scheme then that\u2019s often the best place to start as you\u2019ll get free contributions from your employer. If you\u2019re self-employed or looking for a separate pension, then it\u2019s worth considering opening a stakeholder pension or a personal pension.<\/p>
In this guide we explain some key details around the difference between stakeholder pension and personal pension schemes. We also take a look at common questions like \u201ccan I transfer from a stakeholder or personal pension?\u201d and \u201cwhat happens to my stakeholder pension when I retire?\u201d.<\/p>
A personal pension<\/a> is a scheme you set up directly with a pension provider. It\u2019s a type of defined contribution pension<\/a> where you build up a pension pot over time. You can use this pension pot when you retire to buy an annuity or draw down an income.<\/p> Personal pensions are great for self employed people<\/a> or employees who want to build up their own pension. They are also available to people who are unemployed or not currently working.<\/p> A stakeholder pension is actually a type of personal pension scheme. It\u2019s designed to be a simple type of pension scheme with low charges and a low level of minimum contribution.<\/p> It works a bit like other personal pensions, but the pension provider has extra rules they have to follow. Here are the key features of a stakeholder pension:<\/p> Stakeholders pensions have a minimum contribution level of \u00a320 per month. Other personal pensions have a minimum contribution level that is set by the pension providers. Many personal pensions have a minimum contribution level of \u00a350 to \u00a380.<\/p> There are lots of different types of personal pension, including the following:<\/p> You can transfer your pension to another provider with a stakeholder or another type of personal pension.<\/p> Stakeholder providers must allow customers to transfer their pension for free. Other personal pension providers<\/a> are allowed to charge fees for pension transfer, although they often also allow free transfers.<\/p> You can currently withdraw your pension<\/a> savings any time after the age of 55. The minimum age when you can access your private pension is going up to 57 after April 2028.<\/p> You\u2019ll be able to take the first 25% of your pension as a tax free lump sum<\/a>. After the first 25%, you can choose whether to invest your pension pot in an annuity or draw down income gradually from your pension pot.<\/p> If you\u2019re approaching retirement you can use the government pension service, Pension Wise<\/a>, for free impartial pensions guidance. Or you can book an appointment with an independent financial advisor. They\u2019ll look at all your circumstances and advise you on your pension options.<\/p>Key features of a personal pension<\/h4>
What is a stakeholder pension?<\/h3>
Do they both require the same contributions?<\/h3>
What are the different types of personal pension?<\/h3>
Can I transfer from a stakeholder or personal pension?<\/h3>
What happens to my stakeholder pension when I retire?<\/h3>