UK Employment Law\ Employer \ Stakeholder Pensions
Stakeholder Pensions
A stakeholder scheme is a private pension that:
- Includes final salary;
- Includes money purchase;
- Allows group personal pensions to be open to employed and self employed people.
Companies who provide paid work for five or more people, are legally obliged to offer an occupational pension. The employer must also offer contributions (worth at least 3% of wages into a private or stake holder pension).
The stakeholder pension is monitored by either a manager or by trustees. They ensure that the employer pays correct and regular contributions.
These should be:
- recorded and available to the manager or trustees;
- include details of any late payments;
- include details of missing payments;
- include details of reduced payments.
Failure to comply with stakeholder rules can lead to severe legal penalties (£50,000). If a court considers any failure to be a criminal act, then the employer may face jail. Thus, the employer must:
- keep records of payments updated;
- make sure that payment details are provided to the stakeholder pension fund;
- make sure that record changes or amendments are reported;
- make sure that correct payments are on time.
Starting a stake holder pension
There are a wide range of financial services companies offering stakeholder pension schemes. Check that they are registered with the pensions regulator. It is also a good idea to obtain details from a number of companies so that you may be able to compare quotes.
Employers do not have to make contributions to stakeholder pensions.
Conditions
- Stakeholder pensions must offer an income for retirement making use of at least 75% of the fund.
- Up to 25% can be taken as a tax free lump sum.
- The maximum annual charge is 1.5% of the fund value for each year until the 10th year. It then decreases to 1%.
- No penalty on joining or leaving a scheme;
- The minimum contribution is £20 per month.
- Payments can be halted at any time.
- Benefits can be taken from 55 years old and must be taken by age 75.
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