Firms try to avoid stakeholder pension

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The Independent Online

Some of Britain's biggest companies are trying to avoid introducing Government-backed stakeholder pensions by giving employees a better deal under their existing schemes, according to a survey published today.

Some of Britain's biggest companies are trying to avoid introducing Government-backed stakeholder pensions by giving employees a better deal under their existing schemes, according to a survey published today.

Two-thirds of companies said they would allow employees who are currently barred to join their pension scheme, the research company Incomes Data Services (IDS) found from a sample of 100 UK firms.

The move will remove the need for these businesses to offer a stakeholder pension to anyone who is excluded from their occupational pension provision. Low-cost stakeholder pensions will be on the market from next April. From October, it will be compulsory for any company with five employees or more that does not already offer a scheme to all on the pay-roll to offer stakeholder pensions.

The extension of the company scheme marks a reversal of employers' policies in recent years. Many have increasingly moved employees off expensive defined benefit schemes, which guarantee a final pay-out, in favour of money purchase schemes where the pay-out depends on the performance of share and bond markets.

However, while 64 companies said they would let new groups join the existing pension, 21 businesses said they had recently moved in the other direction and had banned all new employees from taking out a defined benefit scheme. Recruits instead have to take out a defined contribution scheme, which does not ensure a certain final sum. A further 12 said they were considering taking the same action.

However, Roger Self, a researcher for the IDS, pointed out that companies that are quick to move to defined contribution schemes lose a considerable amount of control over retirement policy. "With a defined benefit scheme you can give people early retirement when you want to downsize. Defined contribution schemes work in the opposite way and take away a lot of power as people see their investment going up in these economic conditions and decide to leave with a nice pot of money."

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