As you can no doubt imagine there are reams of information concerning the obligations employers must make concerning their employees and a pension. The pensions service outlines what these obligations are and what circumstances where companies do not have to provide access to a stakeholder pensions service for their employees.
The Welfare Reform and Pensions Act 1999 states that many employers must offer their employees access to a stakeholder pension scheme. This is known the 'employer access requirement'. In effect it means employers have to choose a stakeholder pension scheme that allows your employers to join it should they choose to.
Exemptions to the employer access requirement
Possible exemptions are:
- Employers are exempt to the requirement if they employ fewer than five people. This includes anyone on the payroll of the company such as managing directors, but does not include self employed people.
- If an employer offers an occupation pension scheme which is open for employees to join after a year's service. It is possible for employers to restrict membership to employees older than 18, and to have more than five years remaining before retirement age.
- If an employer has provided access for his or her employees to a personal pension scheme and the following criteria is met:
- It meets the same criteria for access as a stakeholder pension. I.e. over 18.
- The employer contributes at least 3% to every employee's pension.
- There are no penalties for the employee should they stop contributing to or transfer their pension to another scheme.
- The employer deducts the contributions from the employee's pay and sends them to the provider.
The employer can offer different pensions to different staff providing they meet the above criteria, and employers can offer their employees stakeholder pensions if they wish, even they are exempt due to the above criteria.
Once an employer has chosen which scheme to offer their employees many use financial companies to administrate and collect the money for the pension fund. These companies offer a pensions service where the money is invested in the stock market on behalf of the contributor with a view of obtaining a better pension return than they otherwise would have done.
Though this has received less than favourable press over recent times, it still remains a viable alternative to not having a pensions service at all, especially given the current state pension only offers •£10,000 per annum.
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