PENSION UPDATE

One of the Governments election promises was to introduce ‘Stakeholder Pensions’ within their first term of office. Part of the Welfare Reform and Pensions Act, given Royal Assent in late November 1999, set this aim in progress, building the framework which is now in force.

The following basic rules apply:-

Employers with 5 or more employees will be legally required to provide access to a stakeholder pension scheme within three months of them joining the business.

The scheme must be registered with the Occupational Pensions Regulatory Authority.

The employer is legally responsible for deducting employee contributions from the payroll and paying these over to the scheme organiser.

Payment of the contributions must be made 19 days after the month end.

A minimum contribution of £20 per payment is needed, regardless of whether regular payments or one off payments are made.

Employees can stop and start payments whenever they like, without penalty.

All individuals will pay contributions net of basic rate tax.

The stakeholder scheme moves with the individual from job to job.

The only exceptions are as follows:-

The employee earns less than the N. I. lower earnings limit of £75 per week .

You already offer employees membership of a occupational pension scheme within one year of them joining your business.

You offer access to a Group Personal Pension (with no exit charges) to which you contribute the equivalent of at least 3% of employees earnings.

If you fall into any of the categories 1. To 3. above, then you do not need to do anything.

If you have a scheme in place that falls outside 2. and 3. above, you should talk to your pensions advisor, who will be able to discuss any alterations to your current scheme.

If, however, you do not have a scheme in place at all, you must act now and set up a scheme. We can assist you in this and suggest you contact us as soon as possible, or contact your own Independent Financial Advisor. Please remember the scheme must be in place before October 2001, and we predict the usual last minute rush. Avoid this and possible penalties by acting now.

Whichever route you opt to take, you will also need to make sure that your wages system allows for the deductions to be made, and changed at regular times. Our own wages bureau has set this up for our ‘wages’ clients and would be happy to assist you.

Please contact us to discuss the latest changes.