By Mohamed Ali Bernat Employers offering group personal pension (GPP) schemes with 3% contributions...
By Mohamed Ali Bernat
Employers offering group personal pension (GPP) schemes with 3% contributions will have to re-offer the scheme to ensure their exemption from stakeholder pensions, according to Scottish Equitable's pensions development manager Steven Cameron.
The DSS has written to Scottish Equitable to clarify issues on stakeholder exemption raised during the group's recent roadshows.
Cameron said the DSS has confirmed employers would have to keep the GPP open to employees at all times.
He added: "It looks like IFAs would do well to advise their corporate clients to re-offer pension scheme membership at some point between April and September to avoid the DSS coming in and telling them they are not exempt."
All employers with five or more staff members will have to offer a pension scheme under stakeholder rules which take effect from October 2001.
The scheme must be open to all staff but those with existing arrangements can gain exemption, subject to certain criteria.
Cameron was speaking at last month's Scottish Equitable roadshow in London and warned that the rules surrounding exemption were not as clear for GPPs as they are for occupational schemes.
He said: "If a company has an occupational scheme the rules are clear that it does not have to re-offer membership to earlier non-joiners.
"However, the rules for non-joiners are not so clear under a GPP and our suspicion was that a group scheme will not be exempt from stakeholder requirements where a number of employees have not taken it up."
Cameron said that under present DSS guidelines this would be the case even if one employee had not taken up the GPP and would result in the employer having to provide stakeholder as an alternative pension vehicle to all staff.
Cameron reminded delegates at the roadshow that all staff count in the initial five employee rule for exemption, including those under the lower earnings level, controlling directors and temps if they are on the payroll.
After this initial head count, employees can be discounted during the occupational scheme audit, which evaluates the scheme's exemption based on several criteria.
Under-18s and those within five years of normal retirement age are exempt as are who have just taken up employment and have a probation period no longer than 12 months. Contractors and temps not on the payroll need not be assessed and neither should those earning below the lower earnings limit under the occupational scheme.
For a GPP the maximum waiting period is three months and, while firms must offer to contribute 3% of basic pay, the employer can match at a lower rate and still be exempt from stakeholder if the employee said he cannot afford 3%.
Cameron said: "Provided they've offered to contribute 3% there is nothing to stop them matching at a lower level or offering to match at a range of, say, 1-5%."
Cameron said he was also concerned that an employer would have to provide an additional voluntary contributions scheme even if research had shown that all its employees would be better off contributing to another pensions vehicle, such as an individual pension account (IPA).
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