SEARCH, INDEX, UPDATES, CONTENTS, IDEAS, STAKEHOLDER PENSIONS
The Occupational Pensions Regulatory Authority (OPRA) and the Inland Revenue started registering and approving stakeholder pension schemes in October 2000. Schemes currently registered are at http://stakeholder.opra.gov.uk/registrysearch.asp. Be aware of some pension providers who appear to be promoting alternative group personal pensions which we think is misleading.
All employers with 5 or more employees are required to designate and administer a stakeholder pension scheme for their employees since 8 October 2001.
An employer must offer a scheme within 3 months from the commencement of employment. It is not compulsory for either the employee or employer to make any contributions, although this may change in the future.
Stakeholder pensions are one part of a major review of pension regulations and commenced from 6 April 2001. It is proposed that the State Earnings Related Pension Scheme (SERPS) will be replaced by the State Second Pension (S2P) in April 2002, but the impact of this change is not yet clear.
The present Retirement Annuity and Personal Pension regulations limit the contribution made in any one year to a percentage of Net Relevant Earnings. The carry forward of any unused "contribution margin" for 6 years which used to apply was withdrawn for Stakeholder Pensions from 31 January 2002, but still applies to Retirement Annuities (taken out before 1988). It does not apply to Stakeholder Pensions.
There are new provisions to allow premiums of up to £3,600 per annum to be paid to a Stakeholder scheme without reference to Net Relevant Earnings and for premiums to continue for 5 years after a source of income has ceased. This will allow pension contributions to be funded from capital.
Minimum contribution may be as low as £20 per month. People who do not pay tax and those paying the lower rate of tax will benefit from tax relief at 22%.
An employer who contributes at least 3% of earnings to a group personal pension scheme may be able to offer that scheme in place of a stakeholder scheme. Contracts of employment will have to set out terms of membership of the group personal pension plan, and the plan will have to comply with stakeholder regulations on charges. On present information we anticipate that stakeholder schemes will perform better that group personal pension schemes. We do not recommend that small employers implement final salary occupational schemes.
Without recommending any individual products, we suggest you find more information at the following sites -
As part of the implementation process, employers will need to consult their employees before nominating a scheme. The employer will not be bound by the consultation and can select any scheme. Whilst there will be no comeback on an employer for the performance of a chosen scheme, an employer should make clear that they are not recommending a particular scheme above others.
When an employee asks you to make payroll deductions, you must tell them in writing within two weeks, how you plan to make the payroll deduction. We will create a proforma page for you to print as a guide.
The administration of stakeholder pensions will put additional requirements on payroll software. Our payroll software handles these requirements, and we intend to develop it to create deduction files for on-line transmission to the Stakeholder provider.
Contact us for more information.
See also NIC Summary, Retirement, Pension Contributions, Self Invested Personal Pensions, Statutory Money Purchase Illustrations.
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