Stakeholder pensions were introduced in the United Kingdom in 2001 - they were provided
to offer retirement savings plans at a low cost. The impetus for such a scheme was given by the Government's
concern that the increasing cost of pensions provision would represent a large burden for the country.
That burden would potentially hit later generations.
As a result of these concerns, stakeholder pensions
were introduced in an attempt to persuade people in employment to save for their future, thus reducing the
future burden for the state.
Why had this problem come about?
The state pension in the UK has always been funded by National Insurance contributions. For most
people in employment in this country these contributions are taken 'at source' (ie directly from your
wage packet). The theory is that the money raised by the government from these contributions can be
used to pay for current and future pension payments.
Unfortunately, a number of factors mean that the cost of this scheme is increasing for the
government. One of the key factors that has caused this problem is that the proportion of the UK
population that are in work has been consistently falling for some time. With people having longer
life expectancy than was once the case, the UK population is effectively smalling. This means that
the number of people requiring pension payments is increasing at the same time as the number of people
paying into the National Insurance scheme is decreasing. It is widely agreed that such a situation
cannot feasibly continue.
As a result of these issues, stakeholder
pensions were introduced as a cheaper pension provision than many