Pensions - the choices available

When considering pensions for ourselves, we have to think about two different problems. First, how are we going to build up a pension fund during our working lives, which will be big enough to provide us with a reasonable income? Second, when we reach retirement age and wish to take our pension, which of the many options available should we take?

With regard to the problem of accumulating a fund, those of us in a company scheme must consider whether it will provide the level of benefit we need, or whether we should be paying additional contributions. Those who are self-employed or running their own company must consider what type of pension vehicle they should use - personal pension, self-invested personal pension, executive pension or small self-administered pension. All have advantages and disadvantages depending on your circumstances.

Then there is the retirement maze to be negotiated when you finally decide to take benefits. Do you choose a traditional annuity, a unit linked annuity or a with profits annuity? Or perhaps phased retirement or income draw down might be more suitable? And where does stakeholder fit into the picture?

Selecting from all these options is not an easy task. However, we hope to be able to help you. To find out more about the products mentioned here, visit our Moneyinfo pages, where you will find descriptions of them all. Below you will find some information about stakeholder, and on our MoneyInfo section you will find more information about personal pensions and company pension schemes.

If you are still totally confused, or if you would just like to know more, e-mail us on info@sgholding.co.uk for impartial, independent advice or go to our contact page here.

Stakeholder Pensions

The Government of the day has for some time been concerned about the rising cost of providing state pensions to an ever-increasing retired population. The current Labour Government's solution is the Stakeholder pension, aimed at those earning between £9000 and £18500 p.a. The product is a simple, low cost pension plan, and the Government hopes that these virtues will encourage people to take out a plan. This should result in fewer retired people being dependent on State benefits.

To further encourage take-up of the plans, employers with five or more employees must offer those employees access to a stakeholder plan, or another suitable pension arrangement. They do not have to contribute on behalf of their employees, but they must offer a payroll deduction facility.

However, although it is a simple product, it has raised many questions which require some consideration. What should people who already have a personal pension plan do? Should they switch to a stakeholder scheme? How will the benefits of a stakeholder plan affect entitlement to the Minimum Income Guarantee? Should a higher earner, not in the target group, take out a stakeholder or some other form of arrangement?

So although a welcome move, this has added yet another layer of complexity to the pension arena. If you would like some guidance in this area, please e-mail us on info@sgholding.co.uk or go to our contact page here.