Since October 2001, it
has been compulsory for certain employers to offer eligible
employees access to a stakeholder pension
scheme.
Access requires the employer to consult with its
employees on the choice of a suitable stakeholder scheme provider
and then notify all eligible employees of its final selection.
The employer does not have to contribute to the
scheme but it has to provide a facility whereby the employee's
contributions will be deducted from pay and passed over to the
scheme. If the employee does not want to take advantage of this
facility, they should be able to pay by direct debit.
Employer Exemption
All employers must provide access to a stakeholder
pension scheme unless they are exempt. The conditions for being
exempt are as follows:
- There are fewer than 5 people employed. All
employees count for this purpose, including part-time and
non-permanent workers.
- The company offers all employees access to an occupational pension
scheme that they can join within one year of starting
work.
- The company operates a personal pension plan that
meets the following conditions:
- it is open to all employees except those who are
defined as 'non-relevant' (this term is explained below);
- the company contributes at least 3% of basic
salary to the personal pension;
- the scheme has no penalties for members who stop
contributing or who transfer out to a different scheme; and
- the company deducts the employee's payments and
sends them to the scheme if requested to do so.
- The company has an occupational scheme that is only
open to some employees but the rest have access to a personal
pension plan which meets the above conditions.
Non-Relevant Employees
Employers do not have to provide certain employees
with access to a stakeholder scheme. These are known as
'Non-Relevant' employees and are classified as
those:
- whose earnings have fallen below the National
Insurance Lower Earnings Limit (LEL) for at least one week in the
last three months (the LEL is currently £102.00 per
week);
- who has worked for the company for less than
three months;
- who is a member of the company's pension
scheme;
- who is not in the company scheme but was free to
join it and declined the offer or opted out;
- who is excluded by the rules from joining the
scheme because they are under 18 or are within 5 years of the
scheme's normal retirement age;
- who is debarred from joining a stakeholder
scheme because of Revenue restrictions (e.g. the employee does not
normally live in the UK).
Decision Tree
If you are unsure whether or not you have to provide access to a
stakeholder scheme for your employees, try The Pension Regulator's
decision tree or contact us and an adviser will help you.
Q & A's
Unless exempt, you must offer access to a stakeholder. To check
whether you are exempt, refer to the Pension Regulator's decision tree. Alternatively, call our
Helpline on 0845 6012923 or email
us.
Yes. Employers who employ fewer that five people are exempt from
designating a stakeholder.
You do not have to offer access to a stakeholder if you have
already offered access to a personal pension plan that meets the
following conditions:
- it is available to all employees who should have access to a
stakeholder pension scheme (except those under 18);
- the company contributes at least 3% of the employee's basic pay
to the personal pension;
- the scheme has no penalties for members who stop contributing
or who transfer their pension; and
- the company deducts employees' contributions from their pay and
passes them on to the personal pension provider if the employee
requests it.
If the GPP meets these criteria but your staff don't want to
join, they are free to take out a stakeholder of their own. Doing
this, however, means they miss out on the employer's
contribution.
Employer access is regulated by the Pensions Regulator.
Failure to meet your designation requirements could result in a
fine of up to £50,000.
Click here to be redirected to the Pensions Regulator
website.
