Small firms in the dark over stakeholder pensions
Many risking £50,000 fines by not offering schemes to staff
Many small businesses are unaware of their obligation to set up a stakeholder pension for staff, leaving them vulnerable to prosecution, an employment law firm has warned.
Associa Employment Service said that there is a widening ‘knowledge gap’ among firms about stakeholder pension laws that were introduced in October 2001.
Under the legislation, businesses that employ five members of staff have just three months from the date of taking on their fifth employee to set up a stakeholder scheme.
Employers who fail to do this risk a fine of up to £50,000, threatening many small firms with insolvency.
Mark Thompson, legal team leader at Associa, said that there could be a growing number of employers that are not complying with their obligation to provide staff with access to a stakeholder pension scheme.
“Today’s new and expanding employers will not have been targeted by the extensive marketing and information campaigns of three years ago.
“The lack of information being given to these groups of small businesses could lead to a dangerous knowledge gap where many new employers are simply not aware of their pension obligations.
Building a website for your business idea is easier than you might think. Our online tool ranks the top website builders that offer free trials.
“Those employers that have yet to comply should beware. Although the Occupational Pensions Regulatory Authority normally looks to assist employers in understanding and fulfilling their obligations, the regulator does have the power to issue fines of up to £50,000 for non-compliance,” he said.
Thompson offered the following tips to employers to help them comply with the pension requirements-
- Consultation – employers must consult with relevant staff and any organisations representing them, such as trade unions, before a scheme is formally selected.
- Selection – firms must formally select or ‘designate’ a stakeholder pension scheme. The designated scheme must be on OPRA’a register of stakeholder pensions.
- Communication – employers should inform their employees about the selected scheme and allow the pension scheme provider to contact relevant employees.
- Contributions – employers are obliged to deduct employee contributions from the worker’s pay if requested to do so. It is the employer’s responsibility to ensure that the correct deductions are made and that payments reach the scheme provider within set time limits.
- Records – businesses must keep sufficient records to establish that their obligations have been complied with.