Stakeholder pensions 2

United Kingdom

The government has announced decisions on a number of key aspects in relation to stakeholder schemes, including the following:

Charges: a maximum annual charge of 1% of the value of the fund to cover operating costs. There will not be a requirement on schemes to offer individual financial advice within the 1% charge (although some schemes may choose to do so) and it will be open to schemes to charge an additional fee for individual advice if they wish.

Contributions: To encourage small savers and to allow small one-off contributions, schemes will not be able to insist on a minimum level of contribution any higher than GBP20 and will not be able to require members to contribute with any specific frequency e.g. every week, or every month. The minimum has been increased from the original proposal of GBP10.

Advice: schemes must provide basic information and explanatory material but will not be required to offer individual financial advice within the 1% charge. Schemes may provide advice within the charge limit if they wish, or charge a separate fee.

Access: the requirement to provide access to stakeholder schemes will be restricted to employers with five staff or more.

Group personal pensions: Employers who arrange group personal pensions will also be exempt from the access requirement, provided they offer a contribution of at least 3% of earnings. Both exemptions will be reviewed after three years.

Trustees: schemes will have the option of being set up either with a board of trustees, or by an authorised scheme manager.

The draft regulations for stakeholder pensions will be issued for consultation in early 2000, prior to the regulations being laid by around Easter. Legislation for the tax arrangements will be incorporated in the Finance Bill 2000 and in regulations made under that and existing Inland Revenue legislation. Draft Finance Bill clauses and tax regulations will be issued in early 2000.

The full text of the press release is available at

For information on any pensions issues, please contact Nigel Moore on 0171 367 3405 or e-mail [email protected]