facts and stats

Stakeholder Pensions

  1. What are bmra doing?
  2. Representing the large majority of research agencies in the UK, and thus the considerable majority of employees in research, bmra have to take legislation very seriously. Working with other bodies within and outside the research community, bmra address these issues in three stages: Monitoring, Lobbying (where practical), and Advice on the implications and implementation of new laws. Stakeholder Pensions will be implemented next year, but is still at the consultation stage – so bmra are both lobbying and seeking clarification from the DSS Policy Unit.

  3. Stakeholder Pensions – the Objectives:
  4. The Government’s objectives are clear: to encourage more people to save for their own retirement to relieve increasing strain on the state scheme. In particular, the stakeholder scheme is aimed at low earners who have not previously made pension provisions. The schemes will be low cost (only 1% goes towards admin, as against the usual 3% plus), although no investment advice is included with that.

  5. How it will work:
  6. Employers will be required to designate a stakeholder pension scheme. There is no accountability for the selection, but employers must ensure that all employees are aware of the details. For every employee who chooses to join a scheme, employers must then be responsible for deducting money from an employees pay and directing the money to a designated scheme, but they will not contribute to it; the burden is the administration. New employees must be given access to the scheme within three months of starting work. According to Social Security Secretary Alistair Darling’s update on 10th January, this is "intended to balance the aim of ensuring access with the practical difficulties that employers might face in offering access to very short term employees." If the employer has an occupational scheme they will be required to offer access to a pension scheme after 3 months.

    The schemes are designed to be easily transportable, so as employees move around they can tell new employers that they wish to have part of their salary sent to another designated scheme – there is no transfer fee. The employee is not forced to join the employers scheme; they have the right to chose another one. Employers may find themselves collecting contributions and sending them to many pension schemes.

  7. Limits and exemptions:
  8. The limits tend to be very low: a minimum contribution of only £20, which may be paid on an occasional basis, and there can be no insistence on any particular frequency (although changes can be made only every 6 months). Maximum contributions allowable are £3,600 a year. Even so, because the admin costs are so low the schemes will attract employers too.

    There are very few exemptions, although the main one won through lobbying is that employers with four or fewer employees will be exempt completely. Other exemptions, although likely to be of little practical use to researchers, are employers where ALL employees earn below the NI Lower Earnings limit (£66 a week), or employers who already have a contributory pension scheme open to all employees and to which the employer makes a contribution of at least 3%.

  9. Timing:
  10. Primary legislation for Stakeholder Pension was included in the Welfare Reform and Pensions Act, which received Royal Assent in 1999. A year of consultation will close in April 2000, when regulations will be laid down, to be finalised in early August as part of the Finance Bill. It is intended that schemes will be able to register with the Inland Revenue and Opra from October 2000, making them available to employees from April 2001. From October 2001 employers, unless exempt, will be required to be offering access to a designated scheme.

  11. What bmra will be doing:
  12. bmra is talking with the DSS Policy Advisory Unit about the issues of multiple employers (for interviewers, largely), and will be putting case studies to them so we can advise members in a practical sense, if appeals for industry exemption fail. Otherwise, bmra will consider providing a Stakeholder Pension scheme itself if that would offer practical benefits to members. We are also looking at the implications of the Part Time Worker’s Directive, due to be implemented in April 2000, which provides for part time employees in some situations to receive the same benefits as full time workers – including pensions.

  13. Further information:

No doubt your existing pension provider will be pleased to give advice, but otherwise information will be provided through the bmra on www.bmra.org.uk.htm, which will also carry details about the Part Time Workers Directive and the National Minimum Wage Act, and also or through the DSS on www.dss.gov.uk/hq/pubs/stakepen/pension.htm.

Peter Jackling 19th January 2000