Stakeholder pensions were introduced by the Government in April 2001. Their purpose is to encourage more people to save for their retirement by offering a simple, low cost and flexible personal pension.

To have a Stakeholder pension, you must be under 75 and normally a resident of the UK or a Crown servant or the spouse or registered civil partner of a Crown servant.

In most cases, you can pay into a Stakeholder pension if you are:

• employed
• a fixed contract worker
• self employed
• not working or taking a career break. (So someone who stays at home to look after their children, for example, can have one.)

You can also open a Stakeholder on behalf of a child. See How could my family benefit from a Stakeholder pension?

Stakeholder pensions, like other pensions, are highly tax efficient. Here's how:

• You will normally receive tax relief on the money you pay into your pension (called 'contributions'). So, for every £80 you put into your Stakeholder pension, HM Revenue & Customs (HMRC) will pay in an additional £20, even if you don't pay tax at all. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances.*
• If you are a higher rate tax payer, you can claim any additional tax relief through your self-assessment tax return.
• Any growth in your Stakeholder pension fund is free of UK income tax and capital gains tax. However, Legal & General cannot reclaim the tax paid on dividends from UK companies.
• The law and tax rates may change in the future, and the value of tax relief depends on the circumstances of the individual investor.

*These figures assume basic rate tax is 20%

Stakeholder pensions are very flexible.

• You can pay in as little as £20 gross (including the tax relief paid by HM Revenue & Customs).
• You can pay in contributions on a regular basis or make occasional lump sum payments.
• You can stop or start payments without penalty.
• You can currently move your Legal & General Stakeholder pension to another Stakeholder provider without any penalty imposed by Legal & General.
• You don't have to be working and getting any earned income to pay up to £3,600 gross each tax year into your Stakeholder pension.

There are certain limits on how much you can pay in and get tax relief on:

• You can contribute, and receive tax relief on, up to 100% of your relevant UK earnings in a tax year, or £3,600 gross if that is greater. The law and tax rates may change in the future and the value of tax relief will depend on your individual circumstances. If total contributions paid by you or on your behalf exceed an amount known as the Annual Allowance (£235,000 in the 2008/2009 tax year) then HM Revenue & Customs will impose a tax charge of 40% on the excess contribution. However, contributions paid to a pension plan in the tax year in which you take all your benefits under the plan do not count towards the Annual Allowance.
• Even if you already pay into an occupational pension scheme, you may also have a Stakeholder pension.

'Relevant UK earnings' means all of the earnings that count towards the amount that you can contribute to a personal pension. This includes your salary, bonuses, tips, overtime and benefits in kind. In fact, most sources of income that are taxable. The main exclusions to this are income from pensions, State benefits, and certain controlling director payments.

All Stakeholder pension providers are obliged to send you an annual statement telling you what you have paid in and how your pension fund is growing. You should read this statement carefully.

It's wise to review regularly how much you are putting into any pension plan. Many people choose to gradually increase their contributions as they can afford to and as their earnings rise. The value of the units which make up your fund can go down as well as up, so the value of your fund is not guaranteed. It is particularly important to remember this if you are close to taking your benefits.

To help you estimate how much retirement income your pension contributions might give you, use our online contributions calculator.

• You may be able to pay up to £3,600 gross each tax year into a Stakeholder pension for your partner (regardless of whether they are working). This means they will have their own income when you both take your benefits.
• You could start a Stakeholder for your children or grandchildren. To see how much your child's pension could be worth at retirement age, use our Children's Stakeholder Calculator .

What are the charges for a Stakeholder pension?

What are my choices at retirement with a Legal & General Stakeholder pension?

Why should I consider Legal & General's Stakeholder Pension Plan?

Can I manage my Stakeholder pension online?

How can I apply for a Legal & General Stakeholder pension?

How can I find out more about Stakeholder pensions?