Under the Welfare Reform and Pensions Act 1999, most businesses which have five or more employees, are required to provide access to a stakeholder pension scheme.
Although employees aren’t obliged to sign up to the scheme, such provision must be made for all employees who do not otherwise have access to another suitable pension arrangement at work, and who earn more than the National Insurance lower earnings limit.
This does not mean that you as an employer have to provide a contribution to your employees’ stakeholder pension (although you can if you wish).
If you opt for a stakeholder pension scheme – which will probably be your best option if your business can’t afford to contribute to your employees’ pensions – you will need to choose a registered provider. The Pensions Regulator maintains a register of all stakeholder schemes (see www.thepensionsregulator.gov.uk).
You will be exempt from the employer access requirement if you meet one of the conditions listed below.
If you have an existing occupational scheme or an arrangement with a personal pension provider, check the scheme meets the conditions for being exempt. Even if you are exempt you can still give your employees access to a stakeholder pension scheme if you want.
You don’t have to provide access to a stakeholder pension scheme for any employee:
If you are not exempt, there are certain steps you need to follow to offer your employees access to a stakeholder pension scheme. You must:
If you become exempt, you can stop offering your employees access to a stakeholder pension scheme but if circumstances change and you’re no longer exempt, you have to offer your employees access to a scheme again within 3 months.
If the Pensions Regulator removes a stakeholder pension scheme from the register, the scheme trustees or manager will name a new scheme to take over from it. You can accept this scheme without discussing it with your employees but if you want to designate a different scheme, you need to consult your employees again. Either way, you must have the new scheme in place within 4 months.
If you cancel your designation of a stakeholder scheme, you must designate a new scheme before you leave the first one. If you do change your designated stakeholder pension scheme, you have to continue making payroll deductions to the first stakeholder pension scheme if any of your employees are members of that scheme and want you to continue making payroll deductions.
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