Confusion is widespread as employers struggle with stakeholder.
Employers are holding out until the general election before tackling stakeholder, fearing a possible change of Government could mean a change in stakeholder.
Opra is concerned that stakeholder legislation on employers advising on pension schemes is being misinterpreted and employers are calling for clarification.
The debate has been stoked by rec-ent Liberal Democrat calls for the Government to scrap the “obligation for employers to provide financial advice”for stakeholder.
Opra chief executive Caroline Instance says: “Employers should tell their employees this is the designated stakeholder and pass on details of the scheme. Employees can then choose whether to join.
“Employers should not say employees should have a stakeholder and should not give advice as they are not trained for it.”
But LibDem trade and industry spokesman Vincent Cable says employees are relying on employers not just to administer stakeholder pensions but also to provide a range of options, effectively offering financial advice. He says: “If employers are doing all the background work, then the implication is they will be providing a selection of pension options.”
Industry bodies are concerned that employers could suffer a backlash from disgruntled employees unhappy with the performance of the chosen pension plan.
Federation of Small Businesses deputy head of press and Parliamentary affairs David Hands says: “Pensions are a complex business and employers will have to set down and propose a scheme agreed by employees. If the scheme does notwork as well as it might, the employees will criticise the employer for not choosing the best scheme.”
Rather than putting the onus on employers to provide stakeholder options, the Institute of Directors believe it should be down to the employee to arrange their own pension provision. Deputy head of policy unit Richard Baron says: “The idea of stakeholder is great as it encourages people to get pensions but employers should not have to get involved with pension provision if they choose not to.”
A major concern is that employers have too much paperwork already to be able to effectively deal with stakeholder.
Opra is advising employers not to sign up to a pension until April 2001 – the time when the full range will be available. However, David Franklin chairman David Franklin – whose air freshener manufacturing company employs 11 people – believes companies are aware but are postponing making any decision until the next general election has taken place. He believes the election could mean changes to the stakeholder legislation and it would be “foolish” to make plans until then.
He says: “We are looking at stakeholder pensions but we will not bite the bullet until after the election when we will find out what really will go ahead. It is a complicated scheme and I think anyone making a decision now is foolhardy.”
The idea the Government's plans for stakeholder are still subject to change has been emphasised by the exclusion from the scheme of employers with fewer than five employees. Although industry bodies welcome this exemption, not all of them believe the Government is doing enough. Baron says: “The exemption is good but not good enough. We want the obligation to be scraped altogether but at least this shows the Government has budged and might budge a bit further.”
The complicated stakeholder legislation could also confuse employers. Confederation of British Industry policy adviser Mark Thomas says focusing on each individual regulatory impact should be easy for employers to grasp but the idea of companies dealing with all aspects at once is worrying.
The CBI wants to ensure the legislation is implemented with a light touch to reduce the burden. Thomas says: “It will take time for employers to get used to the new system. It will be a steep learning curve and we look to Opra to take this into account.
“Opra can be quite rigorous in the way it inflicts deadlines for contributions but I would hope it will allow for the fact that employers will need time to learn as it would be counter-productive to clamp down on people in the initial stages.”
Opra agrees it needs to approach stakeholder carefully and says its first priorityis to ensure employers fully understandthe designation process. Instance says the intention is to educate first and then follow up on complaints. Guidance will be avail-able to employers needing help but repeat offenders will face punishment.