If you are like most people, the State Pension is not going to be enough to support your lifestyle once you retire. The Stakeholder Pension was introduced in 2001 to serve as an alternative to traditional Personal Pensions, which sometimes caught people out with extra costs. The government introduced Stakeholder Pensions to further increase the incentive for people to save up for retirement.

If you are not earning, you are allowed to invest a maximum annual contribution of £3,600 that takes into account your own payments into the pension scheme, payments made by your company (your company is however not obliged to make contributions) and the tax relief you receive from the government (Inland Revenue).

Like a typical Personal Pension, a Stakeholder Pension works by you making regular payments into your pension policy. Your money is invested on your behalf into different types of investments such as stocks and bonds.

The main thing to bear in mind with Stakeholder Pensions when comparing them to traditional Personal Pensions is that costs are lower and they typically give you more flexibility. 

Whether or not a stakeholder pension is right for you will largely depend on your income, whether you are self employed and your existing pension arrangements.

If you have an existing Personal Pension scheme that you are paying into, the appeal of a Stakeholder Pension scheme will probably depend largely on whether your existing contributions into your Personal Pension are not more than the Stakeholder Pension’s maximum annual contribution of £3,600.