When you are deciding which pension option is best for you, consider the following points:
You should compare the charges you will have to pay for a personal pension with the charges for a stakeholder pension. The charges that a stakeholder pension can make are as follows:
- Management charged in each year must not amount to more than the limit set down in law.
- The yearly charge limit for members who bought their stakeholder pension policy before 6 April 2005 will stay at 1% for the period the product is held. However if a member moves to another stakeholder pension scheme on or after 6 April 2005, the new limit of 1.5% will apply for the first 10 years of being a member of that scheme.
- As well as the yearly management charge, pension providers can recover costs and charges they pay for certain other things.
- With stakeholder pensions, any extra services not provided by the law must be optional.
- Some stakeholder pension schemes are set up so that the fund’s returns are smoothed over the years. If a member decides to leave this type of stakeholder pension provider’s scheme early, the provider may reduce the amount of the individual’s fund when they leave.
- Your employer can make their own contribution to different types of pension scheme for you including stakeholder and personal pensions, as well as occupational schemes. If you are thinking about taking out a stakeholder pension or a personal pension, you should ask your employer if they would contribute to it and whether they provide an occupational scheme.
- Some types of pension give you more say than others over how your pension fund gets invested. If you want to have a say in this, you should bear in mind when you look at the different types of pension available.
- If you are already paying into a personal pension, find out what changes you may have to pay if you decide to transfer to a different scheme some people may be better off staying with their existing scheme or starting a new pension arrangement.
With most personal pension you agree to make regular payments, usually in monthly installments, over a fixed period of time.
With some personal pension schemes, you can change the amount of your payments and how often you pay them. Some personal pension schemes will let you change what you pay without charging you any extra. You should be careful however, because you may have to pay extra charges to your pension provider.
You may also be able to pay in a single lump sum, or a series of lump sums. Charges for these personal pensions may be lower. You usually get tax relief on any payments you make up to a set limit. Please note, even if you are not working you can still pay into your personal pension or stakeholder pension.
Though the information provided here is quite resourceful, it’s limited and cannot be as beneficial as active investigation or obtaining a financial adviser. Please put your best efforts forward before deciding your future is in your hands.
