Is stakeholder right for me?

By THIS IS MONEY
Updated:

 

I AM self-employed, earning less than £10,000 a year, and contribute £118 a month into a personal pension plan. Would I be better putting this money into a stakeholder pension? I am nearly 57 and have been contributing for seven years. MW, Poole.

Jon Minchin, financial adviser with Pensionline says: If you have no significant investments (other than your house) you may not get much benefit of a retirement income based on these relatively small pension contributions alone.

Pensions are limited in what they allow you to do with your fund at retirement - you must use 75% of it to buy an annuity and if annuity rates remain as low as they are at present (and there is no indication that they are likely to rise in the foreseeable future), your annual pension from your fund is likely to be low - so low in fact that if the Government still has in place its Minimum Income Guarantee when you retire you could find you would have been just as well-off not putting the money into the pension at all.

Seek advice from whoever arranged your current pension policy and consider investing in Isas as an alternative, because with these you can take you money out whenever you want and you are not forced to buy an annuity.

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