Ethical Stakeholder Pensions

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Ethical Stakeholder Pensions

Stakeholder pensions were designed as a cheap and easy-to-use financial product to help people to save for their retirement. They were introduced in April 2001 and have to meet minimum standards of flexibility, information and cost set by the government. The annual charges must not exceed 1% of the value of the fund each year.

This is standard to all stakeholder pensions but it is the way the funds are invested which makes them ethical. There are about 10 companies that offer ethical stakeholder schemes and these are distinguished from normal pension funds by the socially responsible investment criteria that the fund manager applies to the fun.

Typically fund managers will use three broad criteria to select the companies they invest in. Humanist - where companies behave in a moral way, for example in not dealing with oppressive regimes, are not involved with armaments, tobacco, alcohol, pornography or gambling. The second criterion has to do with animals. A fund would not invest in companies that carry out tests on animals for example. Thirdly, the environment. A fund would screen companies for good environmental practices and leave out those that behave irresponsibly.

The end result is a pension fund that is both low cost and well regulated but which adheres to socially responsible investment criteria. There is no reason however why investors should accept investment returns which are below those achieved by non-ethically invested funds. It is up to the fund manager to ensure that the returns are acceptable and for the stakeholder pension holder to keep an eye on the performance of the fund to check that it is up to the mark as well as selecting it for its ethical investment capabilities.

For many other alternative ways to build up a fund for retirement, visit us at www.Investments.co.uk

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1998 - 2007 UK Pensions - Planning before, at the onset and during retirement.