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Stakeholder pension schemes are low-cost pensions meant for people without existing private pension arrangements. They were originally targeted at people who earn more than £10,000 a year and who cannot join an occupational pension scheme. They have, however, turned out to have much broader appeal. |
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Unless employers are exempt (see below), they must arrange access to a stakeholder pension scheme (SPS) for those of their employees who earn more than the National Insurance (NI) lower earnings limit. |
Main conditions for a stakeholder pension
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A stakeholder pension is a particular type of personal pension which satisfies a number of minimum government standards, principally the following: |
 | The only charge permissible is a charge on the value of each member's funds, which must not exceed 1.5% a year for the first 10 years, and up to 1% thereafter |
| Members of a SPS must be able to transfer in or out without any extra charge |
| Each contribution can be as little as £20 |
Employer exemption
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The conditions for exemption from providing stakeholder access are as follows: |
| employing fewer than five people |
| offering an occupational pension scheme (OPS) that all staff can join within a year of starting the employment |
| offering access to a personal pension scheme which meets specified conditions |
Employee exemptions
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Stakeholder access does not have to be provided for any employee who: |
| has been in the employment for less than three consecutive months |
| is a member of the OPS |
| is barred from membership of the OPS if under 18 or within five years of the scheme's normal pension age |
| could have joined the OPS but decided not to |
| has earned below the lower NI limit for at least three consecutive months |
Providing access
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In order to meet their responsibilities, employers who are not exempt must: |
| choose a registered SPS from the register held by the Pensions Regulator. The register can be seen on their website at www.thepensionsregulator.gov.uk |
| consult and inform your employees accordingly |
| make available arrangements to deduct contributions from the pay of those employees who choose to pay into the SPS |
| send contributions to the SPS provider within given time limits and record these payments |
Other points to remember
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Employers can give general help and information about the benefits of saving for retirement but they must not advise their employees whether or not they should sign up for a stakeholder pension. The choice of the most suitable pension option is up to the individual (after taking appropriate independent advice if necessary). |
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Employers should be wary about simply 'buying a product'. There are many related issues to be considered, and proper independent advice can avoid inadvertent breaches of the relevant rules. |
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For instance, where access to a SPS is to be provided, all the requisite details must be included in the conditions of employment. Payslips must clearly identify the deduction of contributions. |
