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22 June 2002

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Stakeholder pensions impose further burdens on business

The introduction of stakeholder pensions is imposing further unnecessary and costly administrative burdens on small business owner/managers, according to Cambridgeshire members of the Institute of Directors (IoD).

The Institute’s Eastern Branch chairman Stephanie Smye says: “Delivery of stakeholder pensions through the payroll is an unwelcome imposition, especially since employees can easily arrange their own contributions directly from their bank accounts if they wish. It comes on top of other complications such as the working families tax credit and calculating national insurance contributions on benefits in kind.”

A survey of IoD members reveals that only 31 per cent of bosses employing fewer than five staff will voluntarily opt to introduce stakeholder pensions. In contrast, 83 per cent of employers with between five and nine staff, who have no opt-out unless they provide alternative pension arrangements, expect to administer the scheme.

The challenge that this represents is illustrated by the fact that 41 per cent of respondents would pay an insurance company to run the scheme rather than manage it themselves.

“Eighteenth century economist Adam Smith said that vexation is equivalent to taxation,” said Stephanie Smye. “The vexation caused by stakeholder pensions will have the same effect on employers as a new tax - it will simply take more cash out of the business.”

June 2001




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