A stakeholder pension is a kind of pension plan which is offered within the United Kingdom as an alternative or supplement to the basic State pension which is offered by the United Kingdom Government. Government officials determined that the basic State pension offered to those individuals in the United Kingdom who are no longer working or able to work would be inadequate for full survival, particularly for those individuals who are entering into retirement on their pensions.
To make up for the inadequacy of the basic pension, the United Kingdom offers stakeholder pensions, particularly to those who have no access to a pension within their own companies.
Stakeholder pensions involve paying money into the stakeholder pension to have that money then be invested into shares, bonds, and cash, which will provide money to the pensioned individual when he or she is no longer working. Because it involves investment in the stock market to some degree, if not directly, a stakeholder pension will inherently involve some amount of risk as a result.
Stakeholder pensions within the United Kingdom are particularly aimed at individuals who are earning 10,000 to 20,000 pounds a year and who do not have access to company pensions from their places of employment. Thus, other individuals may find better options than the stakeholder pension offered by the United Kingdom Government.
The stakeholder pension was not designed to be a particularly great or fantastic option, and as a result, it is entirely likely that most people who are either earning more or who have access to a better company option should choose other options than stakeholder pensions.