Stake your claims.
| Author | Constable, Trevor James |
| Position | Pensions - Brief Article |
The new stakeholder pensions will be introduced in April 2001. Trevor James and Jan Burke explain what businesses need to understand, and highlight a few of the main implications
Since the green paper on pension reform in December 1998, stakeholder pensions have become an important issue for employers and their business advisers. Before their introduction next year, businesses need to understand what the stakeholder pension is and what their obligations are. The state cannot afford to continue paying pensions from the public purse at current levels and the stakeholder scheme is intended to provide alternative pensions that are high quality, low cost and easily accessible.
The new pensions will be introduced in April 2001. Any pension scheme that qualifies as a stakeholder scheme must meet certain charges, access and terms criteria -- the CAT standard. It must have a single charging structure, with a maximum charge of 1 per cent of the value of the fund a year (although further advice will cost more). Employers must provide access to a stakeholder scheme by October 2001 for all employees with more than three months' service, unless they are specifically exempted (see below). The minimum contribution to a stakeholder scheme is 20 [pounds sterling].
By October 2001, therefore, employers must understand what the stakeholder pension is, ensure that a scheme is available for employees, check that this scheme complies with the regulations and that they have an appropriate system in place for paying in employee contributions. They need to consider whether current payroll systems will cope with employee contributions into a stakeholder pension scheme and whether they have the resources to manage and implement it.
Employers with fewer than five employees will, as a general rule, be exempt from providing a stakeholder pension scheme. All other employers must provide relevant employees with access to a scheme. There are some exemptions, so employers must first establish whether they are exempt for the following reasons:
* Group personal pensions -- whether an employer with a group personal pension scheme qualifies for exemption will depend on how the scheme was set up. It must allow all relevant employees to join on completion of three months' service, the employer must contribute at least 3 per cent of basic salary, and it must have no penalties for stopping contributions or for transferring.
* Occupational schemes -- to be exempt, an employer must...
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