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Stakeholder Pensions in the United Kingdom

In the United Kingdom, employers with five or more employees who do not offer a retirement plan must offer their employees the opportunity to contribute to “stakeholder pensions.” Employers are not required to contribute to these retirement plans. They are only required to comply with employees’ requests that they withhold specified amounts from their pay and designate a financial institution to receive the contributions.
 
A distinctive feature of stakeholder pensions is that contributions can be made to them for people not working in paid employment.  These contributions can be made by the individuals themselves or other persons. Thus, parents or grandparents can contribute to a stakeholder pension for their minor children.

Stakeholder pensions are individual account plans. A maximum fee of 1.5 percent of assets can be charged by financial institutions or other service providers. To encourage savings by low-income persons, these pensions must accept contributions of as low as £20 (about $40). These plans must have a default investment option that is a life-cycle fund, where the percentage invested in bonds increases as the person’s target retirement date approaches. A maximum of £3,600 a year (about $7,200) can be contributed for a person who is not working.

For further information on stakeholder pensions.

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