One book of first class, one of second and a pension plan please. Or, dropping a loaf of bread, pint of milk and a stakeholder into your shopping trolley is about to become the norm! The type of pension we buy and where from could be about to change forever.

With the introduction of stakeholder a wider range of providers are going to be selling pensions to the public. The new low cost savings arrangement has already raised the profile of pensions, and are encouraging greater interest in what must be the most boring subject on earth.

From October 2001 your employer may be offering you the opportunity to join a scheme chosen by them. You should be aware that their only legal obligations are to designate, provide access to information and to deduct your contribution directly from payroll. It is unlikely they will contribute or provide any additional benefits. They may be exempt from the rules if they have fewer than 5 employees or already offer a suitable occupational or group personal pension plan.

So, what should a stakeholder pension look like and what are the advantages to you?

The rules

Up to £3600 may be contributed each tax year, without any need for a member to have earned income.

• Contributions in excess of this may be made subject to the current age and earnings related limits for Personal Pensions see pink tax tables..
• Contributions within the limits can be made to one or a number of schemes
• All contributions will be paid net of basic rate tax. (Including the Self Employed)
• Higher rate tax payers will claim their additional relief through their tax returns as before.
• Where contributions in excess of £3600 were being made, they may be continued for up to 5 years after earnings cease.
• Members must be resident in the UK or receiving earnings in the UK
• Members of occupational schemes will be able to contribute up to £3600 each tax year, in addition to the company pension scheme.
• Contributions can be made up to the age 75
• Benefits will be similar to Personal Pensions
• Transfers between schemes must be accommodated

Minimum standards

To qualify, a Stakeholder scheme must meet certain standards.

• A maximum charge of 1% per annum of the members fund value, to cover all basic scheme functions, including administration and investment of assets as well as an allowance for basic advice.
• Required to accept contributions of at least £20.00 whether regular or single
• Transfers in and out must be excepted/made without penalty or charge
• A default investment option must exist in the absence of instructions from the member

How do you choose?

Just because your employer is endorsing a scheme, it may not necessarily be the best type of plan for your needs. You should compare carefully before committing your money. The new charging regime could restrict choice of investment funds and some providers may install a minimum premium higher than £20.00 per month.

Here's the low down of where you can buy a Stakeholder scheme and get advice?

Employer

Employers are obliged to offer information regarding their chosen scheme. This could range from a simple leaflet, through to an introduction to a qualified adviser. The level of support they offer you, will be a reflection of their commitment to you as an employee.

Direct Providers and Retailers

Many supermarkets, retailers, and even the post office have teamed up with pension companies to capitalise on their brand. They will not be offering advice as part of the package and will leave you to make your own mind up.

Banks, Building Societies and Life Assurance companies

Most companies with their own sales forces will be using Stakeholder as an opportunity to increase their share of the pensions market. Although they will be offering advice, they'll only select a product from their own range. Even though most will say that they are salaried, salesman will probably receive bonuses, based upon overall production and retention of business.

Independent Financial Advisers

IFA's will be offering an impartial view of the Stakeholder and will be acting on your behalf. They are obliged to select the most suitable product from the whole market place. They may be paid via commissions from product providers, or fees paid by you.

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