Employers may be better off paying into a stakeholder scheme as opposed to an occupational AVC arran...
Employers may be better off paying into a stakeholder scheme as opposed to an occupational AVC arrangement, according to John Wilson, a research consultant at HSBC Actuaries and Consultants.
Speaking at the HSBC stakeholder seminar in London on 8 March, Wilson said this is because those employers would be able to take advantage of the possibility of higher tax-free cash benefits.
He said: "At very least, employers that promote their AVC arrangement will also have to mention that, for certain scheme members, there may be a better alternative, such as stakeholder. Some employers may also want to run a stakeholder scheme alongside the AVC arrangement but, before doing this, expert advice is recommended."
For those that are eligible for concurrent membership of occupational pension schemes and personal/stakeholder pensions, the maximum contribution that can be paid to a personal pension or stakeholder is £3,600 pa.
Wilson added that up to 15% of remuneration can still be paid towards the occupational scheme. The benefits from a personal pension or stakeholder can usually be paid on top of the benefits from the company scheme.
Under stakeholder regulations, Wilson said that employees who have been offered membership in an occupational pension scheme but have declined it are not classified as relevant employees. However, the position is not so clear in relation to those employees who have joined the scheme but who have subsequently opted out of the pension without leaving the company, he said.
An IFA stakeholder discussion hosted by Royal & SunAlliance in London on 12 March, raised concerns that stakeholder would benefit the wealthy and financially-savvy few who would use it to their tax advantage, while those in lower pay brackets, who it is ostensibly aimed at, would remain in the dark as to its worth.
A survey conducted by Legal & General shows that almost three quarters of employers are aware of stakeholder pensions and half are prepared to contribute.
The research found that 75% of employers employing between five and 50 people are aware of the new stakeholder pension legislation.
In addition, the survey shows that only 24% of employers would not be prepared to make contributions into a stakeholder pension scheme for their employees. Legal & General is now accepting individual and group applications for stakeholder pension contributions starting on 6 April, 2001.
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