Stakeholder Pensions

Tax Efficiency of Stakeholder Pensions

Stakeholder pensions are tax-efficient for both employees and employers

Employees

Contributions are paid net of basic rate tax for anyone who has a plan.

• At the current 22% basic rate of tax, a basic rate tax payer who wants to invest £100 a month in a stakeholder pension will contribute only £78
• A higher rate (40%) taxpayer must reclaim the extra 18% tax relief through their self-assessment tax return.

Employer

Contributions that are not treated as benefit in kind enjoy full tax relief.

No National Insurance Contributions are made on payments.

Your Obligations as the Employer

As the employer you have to provide access to a stakeholder pension scheme. You do not have to set one up and run it.

The stakeholder pension provider or manager is responsible for the administration of the scheme.

You cannot be held responsible for the performance of the pension you choose.

As the employer you will have to:

• Choose a registered stakeholder pension scheme (or schemes) from the list of registered pension schemes held by The Pensions Regulator.
• Discuss your choice of scheme with eligible employees (see below for exemptions)
• Designate (formally choose) the stakeholder pension scheme
• Inform your employees of the name and address of the scheme
• Arrange to deduct contributions from your employees' pay
• Send your employee contributions (and employer contributions if applicable) to the stakeholder pension scheme provider within the given time limits
• Record the payments you make to the stakeholder pension scheme provider