offering scheme to entire workforce could break welfare reform and pensions act 1999
Employers are in danger of breaching an Act of Parliament by offering stakeholder to their entire workforce, according to Steve Bee, head of pensions strategy at Scottish Life.
He said companies had been put into an 'invidious and difficult legal position' because the regulations remain unclear.
Bee said companies are in danger of falling foul of the Welfare Reform and Pensions Act 1999 when people who already have a company scheme are given access to the stakeholder provider that has been designated by the employer. Under stakeholder, employers were made exempt from regulations preventing them from offering financial products to their employees. But this exemption only covers relevant individuals. Those who have cover under occupational schemes are non-relevant.
An employee with an occupational scheme who decides to use the stakeholder provider as an AVC vehicle could challenge the company if he/she decided that he/she was unhappy with its performance, said Bee.
The large number of companies that simply offer stakeholder to all their employees could find that they were offering products in contravention of the Act and be open to claims from employees, according to Bee.
He said that companies need advice when trying to establish who they should be offering stakeholder to. Pensions lawyers agree that there is a problem with the legislation.
Robin Ellison, chairman of the pensions practice at Eversheds, said: 'There is a serious gap in the law. It's not right that employers are exposed to risk in this way.'
Companies could also be breaching the law because of advice given on stakeholder, said Bee. He said that the Financial Services Act 2000 does not exempt employers from giving advice on stakeholder to relevant persons but again that they may not be covered for part of their workforce.
'It's a question of how many laws employers are breaking. The legislation is unclear, which is appalling when you consider that it has been four years in the making,' he added.
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