After a lengthy gestation period, the Government’s plans for stakeholder pensions are becoming clearer. The recently published Stakeholder Pension Schemes Regulations set out the detailed arrangements for stakeholder pensions and confirm the implementation timetable.
The key date for employers is 8 October 2001, from which time non-exempt employers will have to provide employees with access to a stakeholder pension scheme. Exemption will only be given to employers who: provide all employees aged 18 or over with the opportunity to join their pension scheme within 12 months of commencing employment; contribute at least 3 per cent of basic pay to a group personal pension that they offer to all staff; or have less than five employees.
Employers without full exemption will have to designate a stakeholder pension scheme for some or all employees, having previously consulted with them and their representatives, and provide them with information about the scheme.
The Engineering Employers’ Federation recently held some regional seminars in conjunction with Legal and General to help members understand these new legal requirements during which we identified some practical employee relations issues.
First, employers are concerned they will be forced to make a financial contribution to their designated scheme. This is likely to be particularly strong in firms which provide only some employees – typically white-collar staff – with the chance to join their pension scheme. The need to designate a stakeholder pension scheme for the rest of the workforce will inevitably lead to pressure for an employer contribution to members of their occupational pension scheme that matches what they are making.
Second, employers believe, in the future, they could face pressure for compensation if their designated scheme underperforms in comparison with other stakeholder pension schemes. Although employers cannot be held legally responsible for the financial performance of their scheme, it seems likely that if an employer’s scheme performs less well than a scheme designated by, say, a neighbouring employer, they will at the very least, face pressure to change their designated stakeholder pension, but could also receive demands for financial compensation.
Employers need to start thinking about such employee relations issues. But while they have a “window of opportunity” to plan, one important piece of the stakeholder pension “jigsaw” is still missing. This is whether employees can have a stakeholder pension scheme and, at the same time, belong to either a final salary or money purchase pension scheme. Until the Government resolves this, employers cannot make any final decisions.