Stakeholder pensions

Stakeholder pension schemes are low-cost pensions meant for people without existing private pension arrangements. They were originally targeted at people who earn more than £10,000 a year and who cannot join an occupational pension scheme. Auto-enrolment has changed the attractiveness for workers but they still have appeal for some.

Main conditions for a stakeholder pension

A stakeholder pension is a particular type of personal pension which satisfies a number of minimum government standards, principally the following:

  • The only charge permissible is a charge on the value of each member's funds, which must not exceed 1.5% a year (see note below)
  • Members of a SPS must be able to transfer in or out without any extra charge
  • Each contribution can be as little as £20

Note: The only charge permissible is a charge on the value of your funds, which must not exceed 1.5% a year for the first 10 years, which then reduces to 1%. For policies before 6 April 2005, the maximum charge of your fund value is 1%.

Employer exemption

The conditions for exemption from providing stakeholder access are as follows:

  • Employing fewer than five people
  • Offering an occupational pension scheme (OPS) that all staff can join within a year of starting the employment
  • Offering access to a personal pension scheme which meets specified conditions

Employee exemptions

Stakeholder access does not have to be provided for any employee who:

  • Has been in the employment for less than three consecutive months
  • Is a member of the OPS
  • Is barred from membership of the OPS if under 18 or within five years of the scheme's normal pension age
  • Could have joined the OPS but decided not to
  • Has earned below the lower NI limit for at least three consecutive months

Providing access

In order to meet their responsibilities, employers who are not exempt must:

  • Choose a registered SPS from the register held by the The Pensions Regulator. The register can be seen on their website at Pensions Regulator
  • Consult and inform your employees accordingly
  • Make available arrangements to deduct contributions from the pay of those employees who choose to pay into the SPS
  • Send contributions to the SPS provider within given time limits and record these payments

Do contact us if you would like further help or advice on this subject.