By Ruth Alexander In criticism of the DSS employers' guide to the stakeholder pension, Scottish Lif...
By Ruth Alexander
In criticism of the DSS employers' guide to the stakeholder pension, Scottish Life has issued its own user-friendly booklet for IFAs to use in explaining the new pension regime.
Speaking at the Scottish Life CP61 Revisited roadshow, Steve Bee, head of pensions strategy and Paul Goodwin, IFA business development manager, said the recently published DSS employers' guide to stakeholder is difficult to read and understand.
Bee said the simple question of whether an employer is affected by the new legislation is not easily gleaned from reading the DSS book, entitled "Stakeholder pensions - a guide for employers."
Bee believes that many small businesses are likely to remain unaware that directors count as employees. If a company has two directors and three employees this would count as having five employees and would not exempt the employer from providing a stakeholder pension. Bee said this lack of awareness could result in a £50,000 fine, if an employer does not provide access to a stakeholder pension for their employees by 8 October 2001.
Furthermore, he said a report, undertaken with the assistance of the Federation of Small Businesses, found that two thirds of the employees of small to medium-sized companies are not covered by any pension scheme.
He said where companies with fewer than 25 employees were considered, this figure rose to 90%. According to Bee, the report also found that only 28% of occupational schemes cover all employees.
Bee said: "However, we know that it is not as clear-cut as all that. It is not simply a question of how many employees are not in occupational schemes, but how many 'relevant' employees there are. GPP members would not show up in such data - there could be a million employees in this category alone.
"Also, many employees have taken advantage of the 1988 ruling allowing them to leave or not join occupational schemes - there could be a significant number of people in this category, again, such non-joiners would not count as relevant employees as far as the stakeholder access requirements are concerned."
Explaining the intricacies of the stakeholder legislation, Bee outlined factors which would make an employer exempt from stakeholder access requirements as well as outlining acceptable alternatives to stakeholder.
Bee said there were a range of factors that would make an employee exempt from stakeholder: they have worked for the employer for less than three months; they earn less than the lower earnings limit; they are members of an acceptable alternative pension arrangement supplied by their employer; they could have been members of an occupational pension scheme, but chose not to join; they are under 18 years; they are within five years of normal retirement age; they can not join a stakeholder pension scheme because the Inland Revenue will not let them.
Most employers do not have sufficient knowledge of stakeholder and the IFA's role in informing them will be vital, according to Scottish Life. Ultimately, the deciphering of the law on behalf of employers will rest with IFAs, according to Bee.
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