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HOW DOES IT AFFECT EMPLOYERS?

The Government has decided that every employer with 5 or more staff must offer access to a stakeholder scheme or a suitable alternative. If you don't make adequate arrangements you could be fined!

You might be exempt, though - see below.

Even if you are not exempt, your responsibility as an employer is to make a scheme available to those who want it and to deal with the administration.

You are not required to contribute anything yourself.

TIMING

The sooner you make provision for a scheme for your staff the better it will be for them to consider their financial status and the opportunity provided.

EXEMPTION

You might be exempt from offering a stakeholder scheme to your employees if:

  • you have less than 5 employees (including company directors, but not self employed owners)
  • you have more than 5 employees, but they earn less than the Lower Earning Limit or are under 18
  • you already have an occupational pension scheme which meets the following conditions
    • The waiting period to join must be no more than 12 months
    • New members are accepted until they are within 5 years of the scheme's normal retirement age
  • you already offer a group personal pension scheme which meets the following conditions
    • You contribute at least 3% of employees' basic salary
    • You don't insist on employees paying more than 3%
    • Membership of the scheme is offered to all new employees within 3 months of them joining
    • It is available to all employees aged between 18 and 74, under their employment contract
    • You offer to collect employee contributions though the payroll
    • The scheme meets certain other criteria

We can advise whether you are likely to be exempt.

I DON'T THINK MY BUSINESS IS EXEMPT - WHAT NEXT?

Your options are:

  • Set up a stakeholder pension scheme now
  • Set up other types of pension arrangement in order to obtain exemption

Please ask us for advice.

I WILL BE SETTING UP A STAKEHOLDER SCHEME WHAT DO I HAVE TO DO?

"Designate" a scheme

This means the process of formally selecting a scheme and inviting staff to join.

The designation process involves the following stages:

•Consultations with employees and their representatives about your choice of scheme

This must be done before making the final decision, but the final choice is yours. There is no set format for the consultation exercise and we will be delighted to help with this.

•Choosing a scheme

This involves research, but note that all schemes have to meet the minimum standards set by the Government, and many schemes exceed these standards. We shall provide all the help you need on this.

Any scheme you choose must be on The Pensions Regulator's register of stakeholder pensions - any scheme we recommend will be on that list.

•Recording your choice

For your own protection you should formally record what you have done in order to comply with the regulations (for example, in a Board resolution.)

•Providing staff and their representatives with information about the scheme

The information provided must include the scheme name and address and may include other details about it. Again, there is no set format.

Offer payroll deduction facilities

You are required to offer the facility of collecting employee contributions by deduction from their pay (but note that staff are allowed to pay their contributions direct to the scheme provider.)

Record and remit contributions made

You will need to keep up to date records of amounts contributed by you and your employees and those records will need to be sent to the scheme provider for monitoring purposes.

Contributions must be paid to the scheme provider within 19 days of the end of the month in which the deduction was made.

All employee contributions are made net of basic rate tax relief and are deducted from net pay (i.e., after all other deductions.)

YOU MUST COMPLY WITH THESE REGULATIONS OR BE FACED WITH BEING FINED BY THE PENSIONS REGULATOR

QUESTIONS & ANSWERS

1. Do I have to contribute?

No

2. Am I responsible for the performance of the fund?

No

3. Do my employees have to join?

No - you only have to offer access to a scheme - it is up to the employees to decide if they want to join.

4. I currently have less than 5 employees - what happens if the number grows to 5 or more?

If you were previously exempt, you will have 3 months from the date of increase to comply.