UK - The Occupational Pensions Regulatory Authority (OPRA), the UK pensions industry watchdog body has issued a set of guidelines to dispel any misconceptions about the impending October 8 deadline for the introduction of new stakeholder pension schemes.
The first myth it dispels is that the October deadline will be put back. OPRA makes it clear that there will be no change.
OPRA also seeks to alleviate the fears that employers have to set the schemes up and contribute themselves. There is no obligation for employer contributions and they need do no more than provide access to a scheme through the payroll.
Furthermore, employers will not be held responsible for schemes that don’t perform well, notes OPRA.
For employers to seek financial advice before offering access to a stakeholder scheme is not a prerequisite of Stakeholder, says OPRA, adding though that they may be liable to fines if they don’t offer a scheme without having an exemption.
OPRA claims that it is not a complicated process and there are very few rules to comply with, the most important being making contributions on time.
Dealing with stakeholder will not cost a fortune, as widely rumoured, says OPRA. It should only involve a few hours work spread over a week or two and many providers will arrange it all for nothing.
The subject of stakeholder versus group personal pensions (GPP) has caused some confusion. OPRA believes that GPPs may be an “easier” option where they already exist and if only small changes are needed to get an exemption from stakeholder.
However, employers have to contribute a minimum of 3% of salary to GPPs but nothing to stakeholder. This is an advantage to employees, provided it doesn’t disappear in charges, the watchdog points out.
Though GPPs have wider investment options, stakeholder schemes have the added advantage of default options for those that don’t want to decide where their money is invested, it says.
Finally, says OPRA, stakeholder has not been the failure it’s commonly perceived to be. Some 300,000 stakeholder schemes had been taken out by the end of July, which OPRA considers good considering they only went on sale in April.
Employers can seek exemption form stakeholder if they have fewer than five employees, if they already have a pension scheme open to all staff between 18 and five years before the scheme’s prescribed retirement age, if an employer offers to pay at least 3% of salary into the personal pensions of all staff over 18, or if all employees over 18 are covered by two or more of the these conditions.
OPRA can impose fines of up to £50,000 (€80,575) to any non-exempt employer who fails to offer access to a stakeholder scheme.