Stakeholder Pensions

Basic State Pension, SERPS and S2P

The value of the basic state pension is gradually being eroded over time, and it should be remembered that not everyone automatically qualifies for it, you have to have had a certain level of National Insurance contributions during your working life.

You can get a state pension forecast from the Department of Social Security and to check if you National Insurance contribution levels are sufficient, and if there happens to be a deficit in some instances, you can make voluntary contributions to rectify this.

SERPS was introduced in 1978 and is an earnings level related benefit which has now been replaced from 6th April 2002 by S2P or the State Second Pension as it is commonly referred to. This additional benefit was brought in to focus benefits to a greater extent towards those on lower levels of earnings.

The intention is to provide a greater state pension for lower paid employees. Those earning less than the lower earnings threshold are treated as if they earn the lower earnings threshold. Carers, and in some circumstances, those with disabilities are also treated in this way.

S2P operates in 2 phases, phase 1 lasting for 5 years. During the first 5 years the S2P is earnings related. Earnings are split into 3 bands to calculate the pension amount. It is possible to contract out of the S2P via occupational pension schemes, personal pensions and stakeholder pensions (either individual or group).

Click here to request more information about Basic State Pensions, SERPS and S2P.

Stakeholder Pension Plans

Stakeholder pensions became available from 6th April 2001. Stakeholder pensions are basically money purchase arrangements, similar in many respects to current personal pension arrangements. The Government's proposed aim is a pension arrangement that is simple to understand with low charges.

Schemes have to meet certain minimum standards to be granted stakeholder status. The minimum standards relate to:

Eligibility - Stakeholder plans are available even to those not working and the under 16's

Contributions - the minimum premium for a Stakeholder plan is £20.00 per month

Charges - the annual management charges on a Stakeholder contract must not exceed 1% per annum

Transfers - there must be no penalty to transfer the contract to another provider or penalties imposed if contributions cease early.