They are intended to provide a low running cost method of saving for retirement that is paid for directly from the participating employees wages. The scheme was launched on 6th April 2001 and employers had six months from then to make a stakeholder scheme available to their employees, however, they are under no obligation whatsoever to join the scheme. Contributions are taken directly from the participants wages, the exact amount is decided by the employee but the minimum is £20 a month. The employer does not have to make any contribution but may choose to do so. Stakeholder pensions are not government supported and they have the same 'value may go up or down' risk as any pension or investment.
The employer is not the provider of the pension, they merely make one available and collect the money. The providers are the insurance/pension companies that run the special stakeholder pension. They have to satisfy specific conditions regarding, among other things, the costs they charge and the level of premiums they will accept. Each provider has to be authorised by the governing body before it can be nominated as a Stakeholder Pension provider. Most, if not all, of the normal high street insurance companies are registered as providers along with many others, so there is quite a choice available.
There are only a few reasons that would exempt an employer from setting up a scheme:
- You have less than 5 employees. It does not matter whether they qualify or not.
- You already have an existing occupational or personal pension scheme. There are a fair number of conditions on this exemption.
It is your choice whether or not you make the scheme available to new employees of less than 3 months or to anyone earning less than the current NI lower earnings limit, you can get the current rates by clicking 'NI rates' in Related pages.
A scheme must be in place if you are not exempt even if no employees are interested in joining. If you lose your exemption status you must immediately set up a scheme, (it may be a good idea to setup a scheme in preparation for when you have to).
- Get details from a many providers as possible and discuss with your employees. Allow enough time for your employees to make their minds up and make alternative suggestions. If you have decided to make a contribution (you don't have to) then inform your employees of how much.
- From a short list invite prospective providers to make a presentation to your employees and leave details for discussion.
- After selecting your provider invite them to set up stakeholder pensions for your employees who expressed that they would be interested. Get all the information about making the payments to the provider of the contributions you have collected on their behalf. Ensure that your current payroll system can cope with it (call us if it can't cope).
- On the agreed start date process the stakeholder pension through the payroll. Sit back and think what a great job you have done.
