Do I need a Stakeholder Pension?

Stakeholder Pension Laws started in 2001

In 2001, it became compulsory for most employers, including smaller ones to offer a pension scheme to their employees.

Is my business affected?

Do you employ more than 4 people? (include all directors and part-time staff, exclude partners within a partnership, self employed and anyone paid under schedule D)

1.  More Than Four Employees - You Are Affected By Stakeholder Pension Regulations

Your business is required to designate a Stakeholder Scheme or gain an exemption from the rules (even if nobody is eligible to join the scheme).

Designation means that you have to select a provider of a Stakeholder scheme for your business and provide details to your staff on a regular basis.  Find out about designating a scheme.

Exemption can be gained by offering an alternative qualifying pension scheme such as:

• A Group Personal Pension
• An Occupational (Company Rules) Pension Scheme

If you already offer one of these pension scheme but it does not meet the qualifying conditions you must still designate a scheme.

2. Employ Less Than 4

You are currently not affected and not required to register a stakeholder pension.

You are exempt if you:

• Employ less than five employees or
• Have a qualifying Group Personal Pension or
• Have a qualifying Company Pension

If circumstances change you no longer qualify for exemption, you have only 3 months to comply with the law and designate a scheme as normal.

3. Register a Scheme

Affected employers with no pension scheme or a none compliant grouped personal pension or non-compliant occupational pension scheme must comply, designate and register a stakeholder pension scheme and offer it to relevant employees or you could face fines and/or imprisonment.

Procedure

1.  Consult with your employees by announcing that you will be shortly offering a Stakeholder Scheme and give them a timescale to respond with any queries or suggestions (The Consultation Period). 

Save time:  download a draft consultation letter in the Pensions Shop.

2.  After the consultation period has elapsed, you must designate (i.e.  set up a Stakeholder Pension Scheme) for your relevant employees (full or part-time).  You may consider offering access to other employees. 

3.  You must now inform your relevant employees about the scheme and that they can join the scheme.  This is when you issue them a letter with an application pack. 

Save time: download a draft confirmation letter in the Pensions Shop.

4.  For employees who decide to join, you must make deductions for any contributions they wish to make from their pay and pass them onto the designated Stakeholder Pension Scheme within 19 days of deduction from pay.

5.  Please note that employers are currently not required to pay contributions into this type of scheme for their employees.

Alternatively, you can gain an exemption by starting a qualifying Occupational Pension Scheme or a qualifying Group Personal Pension Scheme.

Still not sure? Request advice from one of our Stakeholder experts to contact you and help your business to comply with the law.

4. Relevant Employees

You are only required to offer information to and the chance to join your designated Stakeholder Pension scheme to relevant employees.

Relevant Employees are all your employees excluding the following:

• Employees who have worked for you for less than 3 months in a row
• Employees whose earnings have fallen below the National Insurance lower earnings threshold for one week in the last 3 months
• Employees who have joined your qualifying occupational (company) pension scheme (if you have one)
• Employees who cannot join your qualifying occupational (company) pension scheme (if you have one) because the rules do not allow under 18 year olds to join or those within 5 years of your scheme's retirement age
• Employees who could have joined your qualifying occupational (company) pension scheme (if you have one) but decided not to
• Employees overseas who are not allowed to join a UK pension scheme (under HM Revenue and Customs Rules)

5. Group Personal Pension

Employers with a Group Personal Pension (GPP) or employers considering offering their employees one instead of a Stakeholder Pension or an Occupational Pension Scheme must ensure that you are or will be exempt from stakeholder designation rules.

To do this using the GPP route, you must ensure that GPP meets the following requirements

• Your GPP must be a transparent, penalty free scheme - please contact us for an exact definition.
• All employees are allowed to join the scheme both full or part-time.
• The waiting period before a new employee is allowed to join the GPP must be no longer than 3 months.
• You must make a compulsory contribution of at least 3% of your employee's basic salary (ignore commissions, overtime and bonuses).

Important Note:  There are special rules requiring your employees to match your contribution for schemes set up before 8th October 2001 and employees that joined before then.  Please contact us for the exact rules.

If you choose not to establish an exempt GPP or amend your existing GPP scheme,  you must designate and offer a Stakeholder Pension Scheme to your relevant employees or set up an exempted Occupational (Company) Pension Scheme.

Still not sure? Request advice from one of our Stakeholder pension experts to help your business to comply with the law.

6. Company Pension Plan

Employers with an Occupational (Company) Pension Scheme or employers considering offering their employees one instead of a Stakeholder Pension or a Grouped Personal Pension (GPP), must ensure that you are or will be exempt from stakeholder designation rules.  

To do this using the company pension scheme route, you must ensure that the scheme meets the following requirements

•  All employees are allowed to join the scheme.
• You must make an employer's contribution of at least 10% of the overall contribution to the pension scheme.
• The waiting period before an employee is allowed to join the scheme must be no longer than 12 months.
• You can exclude people who are under 18 years of age or have less than 5 years to go before the normal retirement date.

If you choose not to establish an exempt occupational pension scheme or amend your existing one to comply with the rules, you must designate and offer a Stakeholder Pension Scheme to your relevant employees or set up an exempted Group Personal Pension (GPP) Scheme.

Still not sure? Request advice from one of our Stakeholder pension experts to help your business to comply with the law.