Part 1 of the Welfare Reform and Pensions Act 1999 (WRPA) introduced the new stakeholder pensions and this pension regime was made available from the 6 April 2001 as the governments intention to simplify and reduce the cost of pension planning to the consumer. It is targeted particularly for those with fluctuating, low or no taxable earnings such as a non-working spouse.
The maximum annual contribution to a stakeholder pension is £3,600 or 100% of earnings, subject to an annual allowance of £40,000.
For members of an occupational pension scheme the Inland Revenue will allow them as a result of Pensions Simplification, concurrent membership of as many other pension schemes as is required subject to the the annual allowance and lifetime allowance.
Pension Providers’ all retain the right to alter the terms and conditions of the contracts at some future date. As with personal pensions, the member selects the investment fund(s) and any investment growth accrues, largely free of UK tax, on the contributions paid.
In order to meet Stakeholder requirements, certain mandatory standards must be met including:
- An overall charge limited to a maximum of 1.5% per annul for the first 10 years of the contract.
- This charge must reduce to a maximum of 1% after this time.
- A minimum payment of £20 Gross per month.
- The facility to stop and restart contributions without penalties
- Any transfers out must be penalty free.