Focus on : "Stakeholder Pension Schemes"

Stakeholder pension schemes are new, low-cost pension schemes which are particularly intended for people who cannot join an occupational pension scheme.

The Welfare Reform and Pensions Act 1999 placed an obligation on most employers with five or more employees to offer their staff access to a stakeholder pension scheme by 8th October 2001. This means that the employer must designate (ie formally choose) a stakeholder pension scheme, which their employees can join if they want to. The employer must also arrange to make payments to the scheme by deducting contributions from the employees' pay, if the employees wish to make contributions in this way.

The obligation to provide access to a stakeholder pension applies to many, but not all employers. Employers are exempt if:

• they have fewer than five employees
• they offer an occupational pension scheme which all employees can join within a year of starting work
• they offer employees access to a personal pension scheme to which the employer also contributes

If none of these conditions are met, the employer must provide access to a stakeholder pension scheme. Basically, this means that they must:

• choose a registered stakeholder pension scheme from the list held by OPRA (Occupational Pensions Regulatory Authority)
• discuss the choice with employees
• designate (ie formally choose) a scheme
• provide employees with the name and address of the scheme
• arrange to deduct contributions from employees' pay (for those who wish to pay into the scheme in this way)
• make the deductions and send them to the scheme provider within the given time limits
• keep records of the payments made

Employers who are not exempt must make these arrangements - failure to do so may result in a fine. If an employer who was previously exempt becomes liable under the regulations, he or she will have 3 months to comply.

The law regarding Stakeholder Pensions is contained in the Stakeholder Pension Schemes Regulations 2000 and the above is just a brief overview of some of the main points.

A free DWP publication "Stakeholder pensions - a guide for employers" can be obtained by calling the Inland Revenue Employer's Orderline on 0845 7646 646 or from the internet at www.thepensionservice.gov.uk (click on the employer's section). Information is also available from the Employer's Helpline on 0845 7143 143 and the OPRA website at www.stakeholder.opra.gov.uk