Stakeholder - What you need to know

For further information on Stakeholders Pensions,
please click this button

The "Stakeholder" Pension is a proposal for a new type of pension that the Government intends to introduce by April 2001. The Government outlined their initial ideas on the shape of Stakeholder in December 1998 and in subsequent consultation documents. Some key points are as follows:-

• Stakeholder will primarily be targeted at those earning between £9,000 and £18,500 a year. However, people earning more than £18,500 will be able to take advantage of the lower charges and flexibility that Stakeholder will provide.
  
  
• Everyone will be able to contribute at least £3,600 p.a. to a Stakeholder pension, regardless of their income. Higher contributions may be possible if your earnings justify them.
  
  
• Employers with more than 5 employees will be obliged to provide access to a Stakeholder pension for all of their employees who do not already have access to an occupational pension scheme or "suitable" group personal pension. Suitable means the employer must be paying a minimum contribution of 3% on behalf of their employees, to a group personal pension plan.
  
  
• Main features of a Stakeholder pension - simple charging structure, maximum permitted level of charges, ability to start and stop contributions without penalty, ability to transfer to another scheme at any time without charge.

Basically, Stakeholder will be a very cheap and flexible contract which people will be able to take with them as they move between jobs.

The Cost of Delay

Delaying pension provision until 2001 can significantly reduce the fund built up at retirement. It is therefore important to start (or continue) to save for your pension now.

A Stakeholder scheme is defined in the Welfare Reform and Pensions Bill as any "pension scheme" which is registered as such. The definition of pension scheme is wide enough to include both occupational pension schemes and personal pension schemes. To be registered, the scheme will have to meet minimum standards governing charges, minimum acceptable contributions and investment choices.

You are an employer. What does the Welfare Reform and Pensions Act 1999 mean to you?

If you have 5 or more employees you will have to offer access to a stakeholder or other approved pensions scheme.

1. If you already offer your employees some form of pension arrangement, then you may be exempt from the obligations of having to provide access to a stakeholder scheme.
2. Employers who are not exempt will have to nominate their Stakeholder Scheme by October 8th 2001.
3. Your employees must be consulted before designating your scheme.

How do I know if I am exempt?

If you have fewer than 5 employees then you are exempt from the Stakeholder provisions.

1. Access to a Stakeholders Scheme need not be provided for:-
   - Employees whose earnings are below the Lower Earnings Limit in any week in the preceding 3 months
   - Employees who have been employed for less than 3 months
2. If you provide an occupational pension scheme or group personal pension scheme or group personal pension scheme which meet certain criteria.

If you already offer an occupational or group personal pension scheme to your employees, click here to find out if you will be exempt from the Stakeholder requirements.

For further information on Stakeholders Pensions, please click the button below.