Employees are a difficult lot to please. Take that brilliant new idea you have for improving the company's systems for example - some are enthusiastic about it, others are happy to go with the flow, but there's always a rebellious handful muttering their contempt for your proposal. The introduction of stakeholder pensions has aroused the same sort of reactions from UK employers. But although they're not the most wildly exciting words in the English language, you can't afford to ignore this latest development - the government will slap a ¨£50,000 fine on any company who fails to offer their staff a stakeholder pension by 8 October 2001. Apart from keeping your ¨£50,000 safe, there are many advantages in it for you. ¨† Pros of offering staff a stakeholder pension

  • Existing staff have an incentive to stay with your company.
  • It will attract new staff - flag it up in your recruitment ads and you will be one up on your competitors.
  • Staff benefit from decent tax relief.
  • It's cheaper to implement than other pension schemes.
  • It could be the start of the benefits package you always intended to put in place, but never got round to.

    • What happens if you already offer another type of pension scheme? It doesn't matter, as a stakeholder will:

    • Give your employees more choice.
  • Offer excellent tax savings to those earning up to ¨£30,000 who want to top up their current pension contributions.
  • Provide a good way to keep temporary and contract workers happy without having to include them in a more expensive option.

    • ¨† What is wrong with the current pensions system? The government wants everyone to retire comfortably, but the current pension system is fast becoming unworkable for the following reasons:

    • Life expectancy has increased, which means people are drawing their pension for longer, putting an extra burden on the state.
  • The falling birth rate means fewer people are entering the workplace. As a result, there are less of them paying income tax and national insurance. Falling income and rising costs add up to a failing system. The safety net is for middle-earning employees to take up stakeholder pensions.

    • ¨† What is the government aim in making all employers offer pension plans?

    • The government wants five million people to be covered by stakeholder pensions, so it is targeting employees earning between ¨£9,000 and ¨£20,000 a year.
  • It is hoped that public spending on pensions will fall from 5.4% to 4.5% by 2050. Currently, the state pays 60% of pension income - the government wants to reduce this to 40%, with the private sector upping its proportion to 60%.
  • It hopes to achieve this with a properly regulated, flexible, clearly understood and affordable system.