Stakeholder Pensions

Introduction

All businesses with five or more employees are required to arrange a Stakeholder Pension for their staff to have taken effect from October 2001, with a fine of £50,000 for those who fail to comply. The scheme will affect all those earning between £9,000 – 20,000 (those earning less can still take part) and who work for companies that do not provide a corporate pension. If you employ a fifth employee after the start date you will have three-months in which to set up a Stakeholder scheme. The onus is firmly on the employer to set up the scheme.

“According to the Federation of Small Businesses, employers not only face the burden of administering contributions, they could even be sued if the pension scheme they choose does not come up to their employees’ expectations. At the very least, says the FSB, an underperforming pension scheme could lead to ill will in the office.” I bet!

At the time of writing this article, recent research by Cap Gemini Ernst & Young suggests that the providers of these pensions will not secure a profit until 2010: this obviously makes this type of pension unfavourable with the life and pension companies.

An application pack for the tax approval and registration of a stakeholder pension scheme is available from the Pension Schemes Office (PSO) of the Inland Revenue, or by printing your own forms.

Inland Revenue Stakeholder Guide available from the Department of Work and Pensions