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Don&#39t be burnt at stakeholder

It will be a criminal offence for any employer with more than five

employees not to have some form of pension provision in force for mostof

their workforce before autumn next year.

Those entitled to join a stakeholder scheme include anybody who has worked

for the employer for more than six months, earns over the lower earnings

limit for National Insurance and is more than five years from retirement


The most important point to understand about stakeholder is that it is not

strictly a new form of pension. Pensions can be provided under occupational

or personal pension legislation. Stakeholder merely sets new standards

under this existing legislation.

You cannot bury your head in the sand. If you do, come next year you will

be committing a criminal offence.

You must make available either a stakeholder pension or a pension

arrangement that will exempt you from stakeholder requirements.

Another very important point is that the stakeholder requirements do not

compel you to pay into a pension scheme. While you will have to make

changes and there will be administrative costs involved in those changes,

you are not required to make any additional direct costs towards pension


If your existing pension scheme is of a good enough standard and open to

all your employees, then you could use that to exempt you from the

stakeholder requirements. From what you have said, you do not wish to

extend your existing pension scheme to all your workforce. Therefore, we

will have to see whether your existing scheme will be sufficient to exempt

the category of that workforce which is eligible to join.

If so, you will have met your stakeholder requirements for that group of

employees. However, if there is just one employee who is not eligible to

join the existing scheme but has worked for you for more than six months

and earns enough, then you will have to put in place some other form of

stakeholder provision. Here, your decision will revolve exclusively around


The only action you need to take today is to undertake a proper review of

your pension provision. I feel it is important that this review is

documented correctly and recorded for the future.

It you have no intention of changing your existing position, then,

hopefully, we will be able to use your existing scheme for one class of

employees but we will have to put in place a stakeholder arrangement for

other employees, even though they tend to come and go.

If you do not wish to make any pension contribution for this last sector,

all that will be required of you is to have in place the facility to enable

any of your eligible employees to contribute themselves to a stakeholder

pension through the company payroll.

You will be required to deduct the appropriate contributions, pay them to

the stakeholder pension provider and deal with all administrative matters.

Today, the most important point to understand is that it will be a

criminal offence by next year for you not to have put in place stakeholder

provision for all your eligible employees. Stakeholder provision will not

require you to make additional contributions. However, a suitable

arrangement will have to be in place.

A decision you need to take today and suitably record is your company&#39s

position with regard to pension provision for all your staff, regardless of

their status. Once you have made that decision, then advice can be sought

as to the most suitable way to fit stakeholder around any existing pension



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