Employers who are not exempt must designate and offer access to a stakeholder pension scheme. If any employees join the designated scheme, the employer must offer a payroll deduction facility to those who want it. 

Monitoring by scheme managers or trustees

Stakeholder managers or trustees will be required to monitor that payments made by the employer or deducted from employees’ pay are for the correct amount and are paid in on time. 

Employers will need to maintain payment records and inform the trustees or stakeholder manager of any changes. Any late payments, non-receipt of payments, or reduced payments by the employer that are not explained must be reported 

Penalties

• Employers may incur a civil penalty if they fail to: 
• Keep the record up to date; 
• Send the record to the trustees or stakeholder manager; 
• Inform the trustees or stakeholder manager of any amendments/changes; 
• Make correct payments by the due date. 

The maximum fine possible is £50,000 for a company or £5,000 for an individual. 

Where there is fraudulent intent, the penalty may be criminal. 

Does offering employees a personal pension exempt employers from having to offer a stakeholder pension?

An employer may be exempt if: 

• he/she offers a payroll deduction facility to members of the scheme; and 
• the scheme imposes no penalties on employees who transfer out of the scheme or stop making contributions. 

Additional Info 

Employers’ contributions can be conditional on the employee contributing the same amount. 

Employers can contribute more than 3% but cannot require an employee to pay more than 3% of basic pay (calculated before tax and National Insurance etc). 

Basic pay excludes commission, overtime and bonuses. 

For arrangements in place before 8 October 2001, matching may be allowed at whichever rate has been agreed between employee and employer. An employer need not include the arrangement in the contracts of staff if he can demonstrate that he has behaved as though there is such a term in the contract. 

The exemptions for personal pensions will be reviewed after three years. 

Employers and stakeholder pension schemes 

What do employers have to do? 

Actions required

The legislation requires employers to: 

Provide employees and organisations representing them with basic information about the scheme; 

Offer payroll deductions from an employee’s earnings; 

Maintain records of employee deductions and payments to the scheme. 

Identifying a stakeholder pension scheme

‘Designation’ is the term used to describe the process where an employer formally selects a stakeholder pension scheme that his or her employees are invited to join. 

An employer can pick a scheme by: 

Looking out for stakeholder pensions advertising; 

Choosing a stakeholder pension scheme offered by a provider; 

Using the services of an IFA or consultant to identify a scheme; 

Choosing a scheme specifically for people in his or her type of business; or 

Asking employees for their views.