Always remember that investments can go down as well as up in value, so you could get back less than you put in. How you’re taxed will depend on your circumstances, and pension and tax rules can change.

Stakeholder Pension vs SIPP

Updated On:
Jun 4, 2021
An alarm clock
· 5 min read
Stakeholder Pension vs SIPP

Contents:

We compare two types of personal pensions - Stakeholder Pension and SIPP.

A Self-invested Personal Pension (SIPP) gives you greater control and flexibility over the specific investments that make up your pension pot, whereas a stakeholder pension could limit the investment options available to you but comes with its own set of unique advantages.

What is a Stakeholder Pension

A stakeholder pension is a type of personal pension that must meet minimum standards set by the government, including:

  • Capped charges, 
  • Free transfers, 
  • Low minimum contributions, 
  • Flexible contributions (you can stop and start payments when you want), and 
  • A default investment fund (if you don't want to choose investments).


Stakeholder pensions are designed to be simple, affordable and accessible. They can of particular benefit if you're self-employed, on a low income, or not working.


Stakeholder Pension Advantages and Disadvantages

Advantages

  1. Due to their simple design and flexibility, stakeholder pensions can be of particular benefit to those who are self-employed, on a low income, or not working.
  2. You can stop and start contributions whenever you want without fear of being penalised.
  3. Anyone can pay into your stakeholder pension. For example, your parents or grandparents could contribute to your pension pot.

Disadvantages

  1. Stakeholder pensions come with a default low-risk investment fund. This limits the investment options available to you and could potentially result in lower returns than those of other personal pension plans.

Best Stakeholder Pension Providers

Compare some of the best stakeholder pension providers below:

You usually can't access the money in your pension pot until you are at least 55 years old (increases to 57 in 2028), when you can take 25% as a tax-free lump sum.

Capital at risk. Other charges may apply.

Aviva - Stakeholder Pension - Ready-made

Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.

GO TO SITE

Standard Life - Stakeholder Pension - DIY & Ready-made

Standard Life
Product
Stakeholder Pension
Account Type
DIY & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.

GO TO SITE

Best Pension Providers

Compare some of the best pension providers below.

You usually can't access the money in your pension pot until you are at least 55 years old (increases to 57 in 2028), when you can take 25% as a tax-free lump sum.

Capital at risk. Other charges apply.


Interactive Investor - SIPP - DIY & Ready-made

Interactive Investor
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£0
Annual Platform Fee
 £240 (£19.99 per month)

Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. It also has several ready-made funds and expert ideas to make it easy to choose investments. Interactive Investor charges a flat fee of £19.99 (Platform + SIPP fee) per month, so you know exactly how much you will be paying each month.

Special offer: Open a SIPP by 31 July and pay no SIPP fee until February 2022. Terms apply.

GO TO SITE

Hargreaves Lansdown - SIPP - DIY & Ready-made

Hargreaves Lansdown
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£100 lump sum or £25 per month
Annual Platform Fee
0.45% - 0% (Funds)
0.45% (Shares - max £200/year)

Hargreaves Lansdown has thousands of investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. Choose your own investments with expert research and ideas to help you, or simply pick a ready-made portfolio. Manage via website, app or phone. Hargreaves Lansdown also offers Stocks and Shares ISA, Lifetime ISA, Junior ISA, and Fund and Share Account. These services are intended for investors happy at making their own decisions. Capital at risk. Other charges apply.

GO TO SITE

AJ Bell Youinvest - SIPP - DIY & Ready-made

AJ Bell Youinvest
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£1,000 lump-sum. No minimum for a regular payment
Annual Platform Fee
0.25% - 0% (Funds)
0.25% (Shares - max £10/month)

If you are confident about picking your investments, AJ Bell Youinvest has thousands of investments for you to choose from, including shares, funds, investment trusts, and ETFs. And you can manage them online or with its mobile app. If you need help choosing, it has four ready-made portfolios and other investment ideas. AJ Bell Youinvest does not offer advice. Capital at risk. Pension rules apply.

GO TO SITE

Moneyfarm - SIPP - Ready-made

Moneyfarm Logo
Product
SIPP
Account Type
Ready-made
Minimum Contribution
£1,500
Annual Platform Fee
0.75% - 0.35%

Moneyfarm is a UK robo advisor. It has seven risk-rated portfolios that are recommended to you based on your online investor profile. You also benefit from free and personalised digital financial advice from Moneyfarm’s investment consultants, and you can chat, phone, email, or meet your consultant in person. Tell Moneyfarm when you aim to retire, and it will manage your portfolio around your target retirement date - reducing your risk as the date approaches. Moneyfarm also offers Stocks and Shares ISA and General Investment Account.

GO TO SITE

Vanguard - SIPP - DIY & Ready-made

Vanguard Investor'
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£500 lump sum or £100 per month
Annual Platform Fee
0.15% (max £375/year)

Vanguard is a popular low-cost investment platform with over 70 funds. It gives you the flexibility to choose a ready-made portfolio or build your own.

GO TO SITE

Aviva - Stakeholder Pension - Ready-made

Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.

GO TO SITE

Standard Life - Stakeholder Pension - DIY & Ready-made

Standard Life
Product
Stakeholder Pension
Account Type
DIY & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.

GO TO SITE

Best Pension Providers for Self-employed People

Compare some of the best pension providers for self-employed people below:

You usually can't access the money in your pension pot until you are at least 55 years old (increases to 57 in 2028), when you can take 25% as a tax-free lump sum.

Capital at risk. Other charges apply.

AJ Bell Youinvest - SIPP - DIY & Ready-made

AJ Bell Youinvest
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£1,000 lump-sum. No minimum for a regular payment
Annual Platform Fee
0.25% - 0% (Funds)
0.25% (Shares - max £10/month)

If you are confident about picking your investments, AJ Bell Youinvest has thousands of investments for you to choose from, including shares, funds, investment trusts, and ETFs. And you can manage them online or with its mobile app. If you need help choosing, it has four ready-made portfolios and other investment ideas. AJ Bell Youinvest does not offer advice. Capital at risk. Pension rules apply.

GO TO SITE

Hargreaves Lansdown - SIPP - DIY & Ready-made

Hargreaves Lansdown
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£100 lump sum or £25 per month
Annual Platform Fee
0.45% - 0% (Funds)
0.45% (Shares - max £200/year)

Hargreaves Lansdown has thousands of investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. Choose your own investments with expert research and ideas to help you, or simply pick a ready-made portfolio. Manage via website, app or phone. Hargreaves Lansdown also offers Stocks and Shares ISA, Lifetime ISA, Junior ISA, and Fund and Share Account. These services are intended for investors happy at making their own decisions. Capital at risk. Other charges apply.

GO TO SITE

Interactive Investor - SIPP - DIY & Ready-made

Interactive Investor
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£0
Annual Platform Fee
 £240 (£19.99 per month)

Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. It also has several ready-made funds and expert ideas to make it easy to choose investments. Interactive Investor charges a flat fee of £19.99 (Platform + SIPP fee) per month, so you know exactly how much you will be paying each month.

Special offer: Open a SIPP by 31 July and pay no SIPP fee until February 2022. Terms apply.

GO TO SITE

Moneyfarm - SIPP - Ready-made

Moneyfarm Logo
Product
SIPP
Account Type
Ready-made
Minimum Contribution
£1,500
Annual Platform Fee
0.75% - 0.35%

Moneyfarm is a UK robo advisor. It has seven risk-rated portfolios that are recommended to you based on your online investor profile. You also benefit from free and personalised digital financial advice from Moneyfarm’s investment consultants, and you can chat, phone, email, or meet your consultant in person. Tell Moneyfarm when you aim to retire, and it will manage your portfolio around your target retirement date - reducing your risk as the date approaches. Moneyfarm also offers Stocks and Shares ISA and General Investment Account.

GO TO SITE

Vanguard - SIPP - DIY & Ready-made

Vanguard Investor'
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£500 lump sum or £100 per month
Annual Platform Fee
0.15% (max £375/year)

Vanguard is a popular low-cost investment platform with over 70 funds. It gives you the flexibility to choose a ready-made portfolio or build your own.

GO TO SITE

Aviva - Stakeholder Pension - Ready-made

Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.

GO TO SITE

Standard Life - Stakeholder Pension - DIY & Ready-made

Standard Life
Product
Stakeholder Pension
Account Type
DIY & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.

GO TO SITE

What is a SIPP

A Self-invested Personal Pension (SIPP) gives you more control and flexibility over the specific investments that make up your pension pot. And depending on your pension provider, you'll have the option to either select the individual investments and build your portfolio yourself or choose from a range of ready-made portfolios.


A ready-made portfolio is a diverse mix of investments created by fund managers to help reduce the burden of choosing individual investments. With one ready-made portfolio, you could have access to hundreds of investments.


SIPP Advantages and Disadvantages

Advantages

  1. You have the flexibility to choose exactly what goes into your pension pot. For example, individual stocks and shares, investment trusts, exchange-traded funds (ETFs), unit trusts, cash, bonds, commercial property, etc.
  2. You have complete control of how and where your money is invested and can make decisions that determine how your pension pot performs.

Disadvantages

  1. SIPPs could have higher charges than stakeholder pensions.

Best SIPP Providers

Compare some of the best SIPP providers in the UK below.

You usually can't access the money in your pension pot until you are at least 55 years old (increases to 57 in 2028), when you can take 25% as a tax-free lump sum.


Capital at risk. Other charges apply.

Interactive Investor - SIPP - DIY & Ready-made

Interactive Investor
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£0
Annual Platform Fee
 £240 (£19.99 per month)

Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. It also has several ready-made funds and expert ideas to make it easy to choose investments. Interactive Investor charges a flat fee of £19.99 (Platform + SIPP fee) per month, so you know exactly how much you will be paying each month.

Special offer: Open a SIPP by 31 July and pay no SIPP fee until February 2022. Terms apply.

GO TO SITE

AJ Bell Youinvest - SIPP - DIY & Ready-made

AJ Bell Youinvest
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£1,000 lump-sum. No minimum for a regular payment
Annual Platform Fee
0.25% - 0% (Funds)
0.25% (Shares - max £10/month)

If you are confident about picking your investments, AJ Bell Youinvest has thousands of investments for you to choose from, including shares, funds, investment trusts, and ETFs. And you can manage them online or with its mobile app. If you need help choosing, it has four ready-made portfolios and other investment ideas. AJ Bell Youinvest does not offer advice. Capital at risk. Pension rules apply.

GO TO SITE

Hargreaves Lansdown - SIPP - DIY & Ready-made

Hargreaves Lansdown
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£100 lump sum or £25 per month
Annual Platform Fee
0.45% - 0% (Funds)
0.45% (Shares - max £200/year)

Hargreaves Lansdown has thousands of investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. Choose your own investments with expert research and ideas to help you, or simply pick a ready-made portfolio. Manage via website, app or phone. Hargreaves Lansdown also offers Stocks and Shares ISA, Lifetime ISA, Junior ISA, and Fund and Share Account. These services are intended for investors happy at making their own decisions. Capital at risk. Other charges apply.

GO TO SITE

Moneyfarm - SIPP - Ready-Made

Moneyfarm Logo
Product
SIPP
Account Type
Ready-made
Minimum Contribution
£1,500
Annual Platform Fee
0.75% - 0.35%

Moneyfarm is a UK robo advisor. It has seven risk-rated portfolios that are recommended to you based on your online investor profile. You also benefit from free and personalised digital financial advice from Moneyfarm’s investment consultants, and you can chat, phone, email, or meet your consultant in person. Tell Moneyfarm when you aim to retire, and it will manage your portfolio around your target retirement date - reducing your risk as the date approaches. Moneyfarm also offers Stocks and Shares ISA and General Investment Account.

GO TO SITE

Vanguard - SIPP - DIY & Ready-made

Vanguard Investor'
Product
SIPP
Account Type
DIY & Ready-made
Minimum Contribution
£500 lump sum or £100 per month
Annual Platform Fee
0.15% (max £375/year)

Vanguard is a popular low-cost investment platform with over 70 funds. It gives you the flexibility to choose a ready-made portfolio or build your own.

GO TO SITE

If you are unsure whether you need a SIPP or stakeholder pension, we strongly recommend that you speak to a financial adviser.


1. What's the difference between a SIPP and a stakeholder pension?

A SIPP gives you greater control and flexibility over the specific investments that make up your pension pot. In contrast, a stakeholder pension could limit the investment options available to you but comes with its own set of unique advantages. If you do not need the flexibility and control that come with a SIPP, then a stakeholder pension could be more suitable.


2. Can I transfer a stakeholder pension to a SIPP?

Yes, you can transfer a stakeholder pension to a SIPP. If you no longer want to continue with your stakeholder pension, you'll usually have the option to transfer it to a SIPP or another type of personal pension plan.


3. Can I cash in a stakeholder pension?

You usually can't cash in your stakeholder pension or SIPP before you're 55 years old (increases to 57 in 2028), but there are some rare cases when you can, e.g., if you are too ill to work or if you have a severe illness which means you're expected to live for less than a year.


In the case of the State Pension, the earliest you can get that is when you reach your State Pension age. If you're currently aged between 20 and 39, your State Pension age will likely be 68. If you retire before this age, you'll have to wait to claim your State Pension.

4. How much can I invest in a SIPP?

You can invest 100% of your earnings into a SIPP or stakeholder pension every tax year, up to a maximum of £40,000. The £40,000 limit is known as your annual allowance, and it is the maximum amount you can pay into any pension in one tax year and benefit from tax relief.


5. Is a SIPP a good idea?

If you are comfortable choosing your own investments and want more flexibility and control over how your pension savings are invested, a SIPP could be a good idea for you. If you are unsure whether you need a SIPP or stakeholder pension, you should speak to a financial adviser.


You might also like 🤓

  1. Best Pension Providers
  2. Best Pension for Self-employed People
  3. Best Stakeholder Pension Providers
  4. Workplace Pension
  5. Introduction to Pensions
  6. Best Stocks and Shares ISA


Credits 

  1. Gov.uk
  2. Money Advice Service
  3. The Pensions Advisory Service

Koody Man with Laptop

Subscribe to The Plug

Every month, we'll send you The Plug - a curation of the best personal finance content in the UK. We share real-life stories, how-to guides, top personal finance news, popular community questions, and tips to help you stay on top of your money.

Thank you! Your submission has been received!
Error: This email cannot be added because it may already be on our list. Please enter a different email address.

Read The Plug