Pension Schemes - Frequently Asked Questions

 

Types of Scheme

• Occupational Schemes
  
  
  • What is an occupational pension scheme?
    
    
• Personal Pensions
  
  
  • What are personal pension schemes?
    
    
• Stakeholder Pension
  
  
  • What is a stakeholder pension

Occupational Schemes

Q. What is an occupational pension scheme?

A. An 'occupational pension scheme' is an arrangement an employer makes, or a group of employers make, to provide retirement and death benefits for employees and their families. It is managed separately from the employer's business. The benefits paid by an occupational pension scheme depend upon its particular rules.

An occupational pension can be paid as well as the basic state pension and the pension from the State Earnings Related Pension Scheme (SERPS). Or it can be used to contract-out of SERPS, which means that the pension from your employer will be paid instead of SERPS.

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Personal Pensions

Q. What are personal pension schemes?

A. 'Personal pensions' are run by a wide variety of providers (unlike occupational pension schemes that are only run by employers or their agents). Some personal pension schemes are run by the traditional pension providers (life assurance companies and friendly societies, banks and building societies, unit trusts, and other similar bodies) and others are run by affinity groups (representative and membership organisation, employers, trade unions, trade associations and other similar bodies). It is up to individuals to choose which type (if any) to join.

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Stakeholder Pension

Q. What is a stakeholder pension?

A. 'Stakeholder pensions' are a low cost form of personal pension scheme meeting standards intended to ensure that they offer value for money, flexibility and security. Their minimum contribution level is low, they have low transfer costs and an annual administration charge of no more than 1% of fund value. Stakeholder pensions are aimed mainly at people who are not members of 'occupational pension schemes' and have been available since 6 April 2001.

From 8 October 2001 most employers have to offer their employees access to either a suitable occupational pension scheme or stakeholder pension scheme, to which they pass contributions their employees wish to make from their pay.

People may also join stakeholder pension schemes without going through an employer, and some people who are already members of occupational pension schemes also qualify to contribute to a stakeholder pension (or a non-stakeholder personal pension) as well.

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