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GARRY WHITE AND COMPANY CHARTERED CERTIFIED ACCOUNTANTS
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STAKEHOLDER PENSIONS Stakeholder pension schemes begin operating from 6 April 2001 and the legal requirement on employers to provide access to a stakeholder scheme for their employees will come into effect from 8 October 2001. This means you must give your employees access to a stakeholder scheme no later than 8 October 2001. Main Features Under the new provisions employers will be obliged to: (1) Consult the workforce and any organisation representing them (such as a trade union) on the choice of scheme. (2) Designate a scheme and provide scheme details to employees. (3) Allow representatives of the designated scheme reasonable access to the employees. (4) Provide access for relevant employees to the designated scheme. (5) Operate a payroll deduction facility for those employees who have chosen to pay into the designated scheme. (6) Give the employees information about the payroll deduction arrangements. (7) Send the employees' contributions to the scheme provider within 19 days of the end of the month in which the deduction was made. (8) Keep a record of the payments made to the scheme provider. (9) Ensure the designated scheme remains on the OPRA (Occupational Pensions Regulatory Authority) register. Importantly employers will not be required to contribute to the designated scheme. Neither will they be under any duty to monitor or investigate the investment performance of the designated scheme. Bear in mind that designating and providing access to a stakeholder scheme does not mean you have to set up a pension scheme yourself. Commercial financial services and pension companies offer stakeholder schemes but check first they are registered with OPRA. Employees are under no obligation to join a designated scheme. Exemptions Employers should first check if they must provide access to a stakeholder scheme. If so, they should then check if the access requirement applies to all of their employees. You are completely exempt from the employer access requirement if you meet one of the following conditions: (1) You employ fewer than 5 employees. Where you have less than 5 employees but then employ a fifth person, you have 3 months in which to comply with the requirements. Where you have 5 or more employees but fewer than 5 of them meet the conditions to have access to a stakeholder scheme, you must provide these 4 or fewer employees with access to a stakeholder scheme. (2) All your employees are able to join your occupational scheme within 12 months of starting work for you. (3) You offer all your employees who should have access to a stakeholder scheme (except those under 18 years old) the opportunity to join a group personal pension plan, subject to conditions. You must make at least a 3% contribution to the plan and operate a payroll deduction facility for any employee contributions. In addition, you must ensure the plan does not impose exit charges or penalties. The employer's contribution can be conditional on the employee also making contributions to the plan. For arrangements already in place at 8 October 2001, you must make a contribution equal to or exceeding that of the employee. However, if you offer your employees access to a personal pension plan on or after 8 October 2001, the employee must not be required to contribute more than 3% of pay. The pay by which the 3% contributions are determined is basic pay and does not include overtime, commission, bonuses, etc. (4) You offer an occupational pension scheme for some staff and a group personal pension plan for the rest of your employees, and the schemes meet the conditions set out above. You do not have to provide access to a stakeholder scheme for any employee: (a) Who has worked for you for less than 3 months. (b) Who is a member of your occupational pension scheme. (c) Who cannot join your occupational pension scheme because its rules do not admit employees under 18 years or employees who are within 5 years of the scheme's normal pension age. (d) Who would have qualified for membership of your occupational pension scheme but are now excluded from membership because they did not join the scheme at an earlier time. (e) Whose earnings have not reached the lower earnings limit for National Insurance Contributions for at least 3 months in a row. (f) Who cannot make contributions to the stakeholder scheme because they are prevented from doing so by Inland Revenue restrictions. |
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