Stakeholder pensions - the new type of pension available since 6 April this year - offer a simple, low-cost, flexible pension option for your staff. From October, many employers will be obliged to offer their staff access to a stakeholder pension scheme (unless they already have a pension scheme in place for their employees). Those who don’t bother could wind up with a fine of up to £50,000.
Providing access to a stakeholder pension - and that is literally all you have to do - doesn’t need to cost you anything. You don’t have to run the pension scheme - you don’t even have to set the thing up - all you have to do is choose a scheme provider after consulting your staff and allow your staff to contribute directly through the payroll if they choose. You don’t have to contribute to your employees’ stakeholder pensions - but you can if you wish.
To find out if you are exempt, use the ‘decision tree’ on OPRA’s (Occupational Pensions Regulatory Authority) Stakeholder website at: www.stakeholder.opra.gov.uk/decisiontree. Alternatively, take a look at the government’s booklet ‘Stakeholder pensions - an employer’s guide’. You can get a free copy from the Inland Revenue on 0845 764 6646.
If you’re not exempt, you need to choose a stakeholder pension scheme. The easiest way is to look at the stakeholder pension register on OPRA’s Stakeholder website, which you can find at www.stakeholder.opra.gov.uk. This will give you a full list of all the registered stakeholder schemes, together with contact details and links to the pension providers’ websites. You can get a free copy of the register by phoning +44 (0)1273 627600. Alternatively, you could just follow up one of the adverts in the press or on TV. The most important thing to remember is that the stakeholder scheme you choose must be a registered scheme.
If your situation is particularly complicated or you really can’t face doing it yourself, then you could talk to an independent financial adviser (IFA) - but make sure you talk to a few so you don’t end up paying too much. It’s not necessary to use an IFA - many pension providers will do the work for you at no extra charge.
When choosing a stakeholder pension scheme, bear in mind that the whole point of stakeholder pensions is that they have to meet certain conditions controlled by law. So you can’t go too far wrong. And members can transfer from one stakeholder pension scheme to another without penalties or extra charges. This means that if you want later to change your scheme, your employees can move the funds they have already built up to the new provider without incurring any costs - easy as that.
As part of the move towards stakeholder pensions, you’ll need to set up a payroll facility to deduct contributions from employees’ pay and send them to the scheme provider, if the employee asks you to. Your payroll system may already be set up to deal with deducting pension contributions. If not, don’t worry - some stakeholder pension providers, as part of their service, may help you to set up a payroll deduction system.
Remember that you are responsible for paying contributions on time. Again, there is useful information in OPRA’s ‘A quick guide for employers’ about contributions to personal pension and stakeholder pension schemes, so you know what you have to do (it’s on the OPRA website at www.opra.gov.uk, or call 01273 627600 and ask for a copy).
Useful Publications
Stakeholder pensions - a guide for employers (Department for Work and Pensions)A quick guide for employers - Contributions to Personal Pension and Stakeholder Pension Schemes (OPRA)DTI Small Business Se
