UK – Fines totalling £10bn (€16bn) could be imposed on companies not meeting the new stakeholder pensions deadline of 8 October, claims David Willetts, the Conservative Party’s spokesperson for work and pensions issue, in a private report. The Labour government required most employers without occupational pension provision to offer stakeholder pensions facilities to employees by that date or face fines.
In addition, Willetts suggests that stakeholder pensions are not reaching their target markets and are not extending funded pension provision – indeed, they may be having the opposite effect, and that the employer exemption limit of five or fewer employees is too restrictive and should be extended to companies between five and nine employees.
According to Willetts, latest figures from the Association of British Insurers (ABI) show that only 123,000 of a potential total of 400,000 companies has complied with the October deadline to have a stakeholder scheme set up. This could result in a government windfall of £14bn, though this is more likely to be £10bn if the number of companies registering for a stakeholder scheme continues at the rate of 35,000 per month seen since July.
Willetts says that some companies wishing to sign up for a scheme have been refused by pension providers, since they cannot cope with the extra bureaucracy, and thus he calls on the government to allow a further six month registration period.
The government repeatedly claimed until recently that stakeholder pensions were for 5m people on ‘low or modest’ incomes who do not already have a pension, says Willetts. But he questions whether this group of people actually have the means to buy a pension. He also points out that there is evidence to suggest ‘wealthy’ people are taking out stakeholder plans because of the tax savings they offer.
Moreover, claims Willetts, over half of the 295,00 schemes already sold has been done so by Building and Civil Engineering Insurance to people in the construction industry, and that the vast majority of these are mandatory conversions from existing occupational schemes.
He believes that the introduction of stakeholder has not extended pension fund provision, since the proportion of income saved by the average household has fallen and that fewer people are now saving for their retirement, This is because many people are still confused about what stakeholder actually is and have dropped out of their existing schemes,