Tim Sargisson gives an update nowthe regulations governing the benefit are in forceStakeholder pensionswere introduced earlier this month and by 8 October 2001, firms with five ormore “relevant” employees must offer access to a stakeholdercompliant pension scheme. Personnel Today provides an at-a-glance guide tostakeholder pensionsWhat is a stakeholderpension?A flexible, low-cost,tax-efficient retirement savings plan, which should offer good value to everyone,especially those on low incomes. It should meet minimum standards on cost,access and terms (CAT) standard, namely: – A maximum charge of1 per cent of the fund per annum, calculated on a daily basis of 1/365th perday – The minimumcontribution cannot be set at a level above £20. This applies to regular andsingle contributions. There is no minimum frequency or payment termHow will stakeholderaffect employers?Those with five ormore employees will need to provide access to a stakeholder pension scheme fromOctober 2001. Those with an existing pension scheme may be exempt. Firms needing to offeraccess to a stakeholder pension, must:– Designate astakeholder provider– Provide informationto employees– Offer payrolldeduction for staff contributions– Enable staff to jointhe scheme within three months of joining the organisation– Offer a defaultinvestment choice so that staff do not have to consider investment options fortheir stakeholder paymentsPenaltiesThose firms with fiveor more “relevant” staff that do not offer stakeholder pensions willbe liable to fines of up to £50,000. Individuals (such as trustees) will beliable for fines up to £5,000.What exemptions arethere?Employers running anoccupation pension scheme: This provides an exemption as long as all employeescan join within 12 months of starting at the firm. Employers running agroup personal pension plan: They may be exempt from establishing a stakeholderscheme, as long as:– The firm contributesat least 3 per cent of employees’ basic pay – There are no”exit charges” or penalties– Employees must beable to join the scheme within three months of joining the organisationWhat are the advantagesof a pension scheme? Apart from it being alegal obligation from 8 October 2001, it will bring benefits to the firm:– In an increasinglycompetitive employment market, a comprehensive benefits package, including agood pension scheme, is important – It can attractquality staff, and over the long-term can encourage existing employees to stay– A pension is one ofthe most tax efficient ways of investing – for you and your employees– Your contributionsto employees’ pensions are treated as a business expense– Corporation taxrelief is usually granted in the year contributions are paid, at the highestrate payable by your business. This can reduce the potential amount of taxableprofits earned by your business– Contributions paidby employees also receive tax relief at the highest rate of tax they pay,thereby reducing their personal tax liability– Very little tax ispaid on the actual growth in value of pension contributions, allowing more ofthe growth to remain in the pensionSetting up a pension schemesounds like a lot of work. Is it?– It doesn’t have tobe. An online link can connect a business with pension providers which cansimplify administration for the firm and ensure all stakeholder requirementsare met. These links can be accommodated in the 1 per cent charging structure– Using a payrollsystem, be it a simple spreadsheet or a top-notch software package, a firm canprovide the necessary information about employees to the pension company. Moreaccurate data means fewer queries, faster processing and lower costs– Employees can alsoget online access to their personal pension data, thereby minimising pensionenquiries to employersTim Sargisson is salesand marketing director for the Smith & Williamson interactive pensionsexchange Swipe. [email protected] Stakeholder pensions at a glance 2On 18 Apr 2001 in Personnel Today Comments are closed. Previous Article Next Article Related posts:No related photos.