Stakeholder Pensions

3. Who is Exempt?

Some classes of employer are exempt from the requirement to offer stakeholder schemes.

3.1 Employers with fewer than five employees.

• However, companies which offer pension schemes - particularly schemes to which the employer contributes - will find it easier to recruit and retain employees.

3.2 Employers that already offer an occupational pension scheme.

But access to a stakeholder pension scheme must be provided if you have some employees who cannot join the occupational scheme because of eligibility requirements. For example:

• If the qualifying service requirement for membership of your occupational scheme exceeds one year; or if the lowest age at which employees can join the main scheme is more than 18; or if the highest age at which they can join is more than five years before normal pension age, you may have to provide the over-50s with access to a stakeholder scheme.

3.3 Employers that offer a group personal pension to all relevant employees (see 5), as long as they offer to make contributions and, if required, deduct any employee contributions from payroll.

• This exemption also applies to employers who contribute to employees' personal pensions.
• The employer must offer to contribute at least 3 per cent of employees' basic pay to the scheme. The employer contribution offer can be made conditional on the employee contributing a specified rate, which normally cannot exceed 3 per cent of basic pay.
• The waiting period for joining the scheme must be no more than three months.
• There must be no exit charges for those who stop contributing or transfer from the scheme.

3.4 Employers whose employees all earn less than the NI lower earnings limit - £90 a week in 2008/09 (before tax).