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70,000 Firms flout stakeholder rules

Government admits that only one company has been prosecuted

The Government has only prosecuted one employer out of the 70,000 companies which have broken the rules on stakeholder pensions.

The news has led commentators to doubt whether the proposed national pension savings scheme could be effectively policed.

Axa head of pensions and savings policy Steve Folkard says the stakeholder admission from pensions reform minister Stephen Timms in Parliament recently poses questions over the Government’s ability to slash costs while raising the numbers of people saving in a pension.

Folkard says the stakehol- der regime affects employers with five or more staff while Lord Turner’s proposals for the NPSS hugely magnify the number of employers that will have to be monitored and the cost of policing this.

He believes the Government will have to be much more flexible on the cost of the scheme and massive issues need to be addressed over how employers will provide advice and pay contributions and what penalties will be introduced for those who fail to meet these requirements.

The Pensions Regulator currently holds responsibility for prosecuting schemes falling foul of stakeholder guidelines after taking over from Opra.

Hargreaves Lansdown head of pensions research Tom McPhail says: “If any pension reform is going to be successful in increasing savings, it is going to require the resources to police employers, which means increased costs to the model Turner proposed or a different model altogether.”

Folkard says: “Huge question marks remain about the costs of policing the NPSS, shown by the fact that only one employer has been pros- ecuted for breaking stake- holder requirements. You will have to force these employers to operate the schemes which increases costs and challenges the current debate.”

Timms said: “There are an estimated 350,000 such firms at any one time and it is estimated that around 70,000 of those are not complying with the requirement to designate a stakeholder pension scheme.”


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