Up to a third of employers with occupational pension schemes will have to
allow more staff to join if they want to avoid having to offer a stakeholder
Under rules released by the Government last week, employers running pension
funds will escape providing access to the new pension only if they meet certain
Thousands of schemes would fail, as they are currently structured, on two
key issues – the minimum age for membership and the length of service before
joining the scheme.
Stakeholder pensions are the Government’s plan to provide low-cost pensions
to staff with earnings in the £9,000 to £18,000 bracket, many of whom have
neither company nor personal provision. They will be administered by private
The Government’s position on age limits is that schemes may only exclude
staff under 18. But last year’s NAPF survey reveals that 34 per cent of private
sector final salary schemes have a higher age limit. For money purchase, the
figure is 31 per cent.
There are an estimated 150,000 occupational pension schemes in the UK so,
potentially, 50,000 employers could be affected.
The Government has also decided that pension funds requiring employees to
wait more than a year before being able to join the fund will have to provide
access to stakeholder. Again this will cause problems for schemes as, according
to NAPF figures, about 5 per cent of final salary and 9 per cent of money
purchase schemes impose a wait of more than a year.
The £200m Next pension scheme has an age limit of 20. Pensions manager John
Stevenson said the scheme was likely to extend membership rather than provide
access to the new scheme.
By Tom Powdrill
Rules on stakeholder pensions
• Charge: there will be a maximum annual charge of 1 per cent of the value
of the fund to cover operating costs.
• Advice: schemes must provide basic information and explanatory material
but will not be required to offer individual financial advice within the 1 per
• Access: The requirement to provide access to stakeholder schemes will be
restricted to employers with five staff or more.
• Group personal pensions: Employers which arrange group personal pensions
will also be exempt from the access requirement, provided they offer a
contribution of at least 3 per cent of earnings