Stakeholder Pensions

Background

The Stakeholder Pension Scheme was introduced by the Labour Government to encourage people in employment to take responsibility for their own pension planning.

There are currently approximately four working people to every retired person. By 2040, this figure is expected to drop dramatically to less than two workers per retired person. This means that there will be less than half the revenue from taxes to fund state pensions - an alarming prospect indeed, particularly for the estimated five million people who currently do not or cannot save for their retirement.

In response to concerns as to how pensions will be funded in the future the Government introduced the "Welfare Reform and Pensions Act 1999", which requires employers to offer their relevant employees access to a stakeholder pension scheme, unless they are exempt. The full details of the legislation are set out in The Stakeholder Pension Schemes Regulations 2000

Stakeholder pensions become available from 6 April 2001. They are intended as a low cost, privately funded, supplement to the basic state provision and are targeted at employees on low incomes (£10,00 - £20,000). The pensions are paid for by employees, but managed by employers who must have their schemes up and running by 8 October 2001.