An individual stakeholder pension is one that you arrange yourself. It is a personal pension plan, set up in your name and invested on your behalf.  You can pay into it until you reach age 75, if you wish to do so, in order to build up a pension fund for your retirement.

Stakeholder pensions have received a lot of support from the government in order to encourage everyone to have access to a pension.  The government sets limits on how much you can be charged for a stakeholder plan.

When you retire, you can normally take up to 25% of the value of your fund as cash – tax free. The rest of your fund is used to provide an income.

Pros

• They are easy to join and control.
• The minimum amount you can pay in is as low as £20.
• Your employer is able to pay directly into the plan, if they wish to do so.
• It may be possible for someone else to pay into your pension plan, so family members may be able to make payments if they want to.
• It is flexible to your circumstances, so if you can't afford to make a payment one month then you don't have to.
• The amount you can be charged for your plan is limited by the government.
• You can take a lump sum at retirement as well as receive an income.
• You can take benefits from the plan from the age of 50 if you reach this age before 6 April 2010, (the minimum age will be 55 from this date).
• Your widow, widower, civil partner or other dependant(s) can receive a pension in the event of your death or, if you die before retirement and before age 75, they may receive a tax-free lump sum.

Cons

•  You may have a limited choice of funds to invest in.
•  If you move to a company that has their own scheme they may not be prepared to pay into yours as well.

If you can afford to save but don't want to commit to a regular payment then this could work for you. It is flexible to suit your financial circumstances, and the maximum charges are limited by the government.

Individual Stakeholder Pensions are available through financial advisers or direct from pension providers via the telephone or internet.  If you're not sure, get advice before buying a personal pension direct from a pension provider.

If unsure get advice - If you are unsure about any aspects of pensions or what type may be suitable for you, it is best that you speak to a financial adviser, who will be able to assess your needs and recommend the most suitable products.

Act sooner rather than later - The earlier you start to pay into a pension the greater the income you should receive when you retire.  Even if it is just a small amount to start with, this could make a big difference to your retirement income.