What is a stakeholder pension?

All employers employing five or more employees, who do not offer an occupational pension scheme, must now offer a stakeholder pension. Employees should have been consulted about the scheme in advance.

A stakeholder pension provides a low cost pension that is easy to move between jobs. The pension paid will depend on how much is contributed and how well its investments do.

Good employers will contribute to a stakeholder pension, but there is no obligation on them to do so.

People without jobs (including children) can save through a stakeholder pension, and has tax advantages for some. People with an occupational pension (other than high earners)can also take out a stakeholder pension as an additional pension. It has the advantage over AVCs that some of the pensions pot can be taken as a lump sum when you retire.

The Financial Services Authority has useful information here.

The TUC provides information about stakeholder pensions and its own product offered in partnership with Prudential here.