Am I obliged to offer a pension scheme?

I'm just about to launch a domestic cleaning and laundry business and plan to recruit up to 20 people over the next 2 - 3 years. Am I obliged to offer some sort of access to a pension scheme, either now or in line with my predicted growth of employee numbers? There seems to be lots of advice out there but much of it is conflicting.

Answer You are right, advice may often seem conflicting, but this could be due to the sheer volume of material available on this subject. We have tried to keep this advice to the point without losing context. We hope it helps you see the wood for the trees.

If you have more than five employees on your payroll and do not intend to offer an occupational pension scheme to all employees within the first year of service then you are legally required to offer your staff a stakeholder pension scheme, but employees are not obliged to join the scheme if they do not wish to.

How to set up a Stakeholder Pension: The Government Regulator provides a list of approved suppliers and these include Banks and Investment Companies. Specific advice on stakeholder pensions is available at this link at the Pensions Regulator website.

The website provides extensive details on all types of pensions as well as free-to-download support materials such as leaflets and posters. Here is the link to the employers page.

However, there are changes in the pipeline and you would be advised to take these into account. The recent Turner Report advised that a national pensions savings scheme should be introduced and the government is likely to introduce it by 2008/9. It will require the employer to make a contribution (possibly 3%) and the employee (possibly 4%) and the government will give a 1% tax break on the pensions contribution.

The Stakeholder is likely to continue to be available (but it is not popular with employees); all other existing pension options are also expected to continue but in order to opt out of the NPSS, employers will have to show that the alternative they are offering ticks certain boxes most usually associated with final salary schemes.

More Information
For more information you can visit the Pensions Advisory Service: click here. [UPDATE] The government’s Pensions Advisory Service site is now called ‘Money Helper’.

See also: Staff pension schemes for small businesses

Related Topics

Pension Schemes

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