Know your legal obligations on pensions

Stakeholder pensions

Stakeholder pensions have minimum standards set down in law. They are particularly targeted at individuals earning a moderate income. They are available from most financial services companies, such as banks, building societies and investment companies.

You have to provide your employees with access to a stakeholder pension, if you have five or more employees on your payroll, and do not provide another qualifying scheme. For information about your obligations see the page in this guide: must I provide a stakeholder pension?

Stakeholder pension schemes must satisfy certain criteria:

• Currently the pension scheme provider cannot charge more than 1.5 per cent a year (previously 1 per cent a year) to manage the individual's fund. Charges on stakeholder pensions set up before 6 April 2005 are still capped at 1 per cent a year, and charges on newer arrangements must reduce to 1 per cent or less after the first ten years of membership.
• The stakeholder pension contract must not have charges for members transferring into, or out of, the stakeholder pension scheme.
• All stakeholder schemes will accept minimum contributions of as little as £20, which you can pay each week, each month or at less regular intervals. Some offer an even lower limit.
• The schemes must be run in the interest of members. They are either run by trustees or by the scheme manager.

Employers' and employees' contributions attract tax relief.

There is no charge for employees changing their contribution amounts. They cannot change the amount more than once every six months, unless you as an employer agree to it.

Subjects covered in this guide

• Introduction
• Occupational pensions
• Personal pensions
• Stakeholder pensions
• Contracting out of the State Second Pension and paying Additional Voluntary Contributions
• Must I provide a stakeholder pension?
• Providing a stakeholder pension - key steps

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