Small firms exempt from stakeholder pensions

Social security minister Alistair Darling has announced that small companies will not have to make stakeholder pensions available when the new low- cost pension schemes come into effect next year. The exemption applies to companies employing fewer than five staff. Such companies account for around two thirds of UK employers.

At the same time Darling said employers who provided group personal pensions would also be exempt provided that the employer's contribution to a scheme was at least 3% of earnings.

The exemptions will be reviewed in three years time.

The minister also confirmed that annual charges for stakeholder pensions were to be limited to 1%. Pension providers will be able to charge an additional fee if clients want personalised advice.

The minimum contribution to a stakeholder pension has been set at £20 a month, an increase on the £10 level originally proposed.

As most employees work for larger firms, it is estimated that more than four million out of the five million people in the target bracket of those with earnings between £9,000-18,000 will be able to get stakeholder pensions from their employer.

The government has yet to decide whether employees will be allowed to have a stakeholder pension alongside pensions based on final salary schemes or whether the self-employed will be compelled to save more for their pensions.