Start scheming - stakeholder pensions

Pensions expert Nick Edmans explains the impact of stakeholder pensions​

There are just a few weeks to go before publicans with five or more staff will need to provide them with a stakeholder pension scheme. If you haven't done anything about it yet, there is a simple rule - don't panic. Setting up a scheme is a quicker and simpler procedure than you might think.​

And you are certainly not alone. The Publican's Market Report 2001 survey indicated that only 18 per cent of licensees with that magic figure of five staff had a scheme up and running.

While a third of those surveyed were confident that they would be ready by the October deadline, that still leaves half of you out there who are heading for a possible £50,000 fine.

If you are among the 29 per cent who have heard of stakeholder pensions but don't know how to implement a scheme, or you count yourself in the 20 per cent who had never heard of stakeholder pensions, this page is for you.You value your staff and want to keep hold of them because it's an intensely competitive world out there. But although you appreciate that a company pension is a pretty good perk, you're not so sure about taking on all that extra paperwork. Frankly, you've got enough on your plate keeping the business running without having to worry about a pension scheme as well.

However, if you've got five or more employees, you may soon have no choice in the matter - the arrival of stakeholder pensions on October 8 means that it's time to get a grip and do the right thing.

Stakeholder pensions - the new type of pensions available since April 6 this year - offer a simple, low-cost, flexible pension option for your staff. From October, employers with five or more staff will be obliged to offer them access to a stakeholder pension scheme - unless they already have a pension scheme in place.

Those who can't be bothered should be aware that they could wind up with a fine of up to £50,000.

The good news is that providing access to a stakeholder pension - and that is literally all you have to do - doesn't need to cost you anything. You don't have to run the pension scheme. You don't even have to set the thing up. All you have to do is choose a scheme provider after consulting your staff and, if they choose to take it up, allow them to contribute directly through the payroll. You don't have to contribute to your employees' stakeholder pensions - although you can if you wish.

The first question to ask yourself is: "Do I have to offer access to a stakeholder pension scheme, or is my business exempt?"

To find out if you are exempt try using the "decision tree" for employers on the Occupational Pensions Regulatory Authority (OPRA) website at www.stakeholder.opra.gov.uk/decisiontree.

Alternatively, take a look at the Government's booklet Stakeholder Pensions - an Employer's Guide. You can get a free copy from the Inland Revenue Employer's Orderline on 08457 646 646. Or print a copy off the Department of Work and Pensions website at: www.dss.gov.uk/publications.

Whatever you do, don't assume you are exempt! Quite simply, if you have five or more employees and you do not already have a pension scheme in place for them, the chances are you will need to take action.

If you're not exempt, you need to choose a scheme. The easiest way is to look at the stakeholder pension register on OPRA's stakeholder website. That will give you a full list of all the registered stakeholder schemes together with contact details and links to the pension providers' websites. You can get a free paper copy of the register by phoning 01273 627600.

Alternatively, you could follow up one of the adverts in the press or on TV. The important thing to remember is that the stakeholder scheme you choose must be a registered scheme.

If your situation is particularly complicated or you really can't face doing it yourself, then you could talk to an independent financial adviser (IFA) - but make sure you talk to a few so you don't end up paying too much.

Don't assume you have to use an IFA. Many pension providers will do the work for you at no extra charge.

When choosing a scheme for your employees, remember that the whole point of stakeholder pensions is that they have to meet certain conditions controlled by law.

Members can transfer from one stakeholder pension scheme to another without penalties or extra charges. This means that if, later on, you want to change your scheme, your employees can move the funds they have already built up to the new provider without incurring any costs. Easy as that.

You'll need to discuss your choice of scheme with your staff. How you do this will depend on the size of your business, how you communicate with each other, the geographic location and so on. You could:

• set up a meeting and invite your chosen pension provider to give a presentation to staff and answer questions
• use your staff magazine or newsletter to explain your plans and invite comments and questions
• talk to staff or union reps, present your plans and invite comments and questions
• distribute scheme literature from the pension provider you're considering and ask staff to return their comments to you
• put up a notice and ask staff to let you know if they have any comments on your choice of scheme.

Your staff need to be told about your plans and must have the chance to express their views.

Once you've consulted your staff you are free to designate - that is, formally choose - your stakeholder pension scheme.

Give your staff details of the scheme - including a name and contact information. Your pension provider should be able to offer literature for you to distribute to your staff.

Remember, your pension provider will probably do most, if not all, of the donkey work involved in setting up the scheme and explaining it to members.

Last but most definitely not least, you'll need to set up a payroll facility to deduct contributions from employees' pay and send them to the scheme provider.

Your payroll system may already be set up to deal with deducting pension contributions. If not, don't panic. Some stakeholder pension providers, as part of their service, may help you to set up a payroll deduction system. This is something worth considering when you choose your provider.

Remember that you are responsible for paying contributions on time. Take a look at OPRA's quick guide for employers about contributions to personal pension and stakeholder pension schemes. Go to www.opra.gov.uk or call 01273 627600 and ask for a copy.

Nick Edmans works for OPRA, the body set by by the Government to enforce stakeholder pensions legislation.​

Are you exempt?​

Employers are exempt from having to offer a stakeholder pension if:

• they have fewer than five employees
• they already offer an occupational pension scheme to all staff aged between 18 and five years before normal retirement age (staff must be able to join within a year of starting work for you)
• the employer offers to pay at least three per cent of salary into personal pensions on behalf of all staff aged between 18 and five years before normal retirement age. There must be no penalty for stopping payments or switching out of the scheme
• all staff aged between 18 and five years before normal retirement age are covered by a combination of the two pension options described above.

Useful contacts​

• Inland Revenue employer's helpline: 08457 143 143
• OPAS (Pensions Advisory Service) for individual queries: 08456 012 923.
• OPRA, Invicta House, Trafalgar Place, Brighton BN1 4DW. Tel: 01273 627 600. Website: www.stakeholder.opra.gov.uk

Useful publications​

• Stakeholder pensions - a guide for employers (Department for Work and Pensions)
• A quick