Employers with at least five employees must offer access to a stakeholder pension to their 'relevant' employees. The full definition of relevant employees is outlined in the legislation but in practice, for most employers, relevant employees will be:

• Any employee who earns above the NIC lower earnings limit (£67 per week in 2000/01)
• Any employee who is not a member of an occupational pension scheme.

Employers need only provide employees with access to a stakeholder pension. They do not have to make contributions to the scheme. But they may make contributions if they wish and any contributions they do make will attract corporation tax (or income tax) relief.

An employer who already offers either an occupational scheme or a group personal pension may be exempt if the arrangement meets certain criteria. It is the employer who is exempt and not the scheme.

Employers must:

1. Consult their employees on the choice of stakeholder provider
   There is no formal laid-down process by which employers must consult their employees. However, if there is a recognised trade union of staff association within the company, it would seem reasonable to include them in the consultation process. Employers will need to consider the best way to consult with their employees.

2. Designate a stakeholder scheme
   Employers must either designate a stakeholder provider or set up their own stakeholder scheme. Setting up a separate trust and appointing trustees could involve a considerable amount of work. Most employers would probably find it easier to designate a stakeholder scheme offered by a pension provider such as an insurance company.
   Employers are not legally liable if the scheme they designate turns out to have a poor investment performance. On the other hand, in the interest of good staff relations, it makes sense to choose a reliable provider. Most employers will find advice very helpful when choosing a stakeholder provider.

3. Provide their employees with information about the scheme
   Employers must ensure that their employees are given enough information to let them decide whether or not to join the scheme. Employers should be careful not to go beyond just providing information, because they are not authorised to advise employees on whether or not to join the scheme. Advice to individual employees should only be given by an authorised financial adviser.

4. Ensure that contributions made to the scheme are passed to the scheme provider within set timescales
   Occupational pension scheme contributions must be paid across to the pension scheme provider within strict timescales. The existing regulations about this are being extended to cover all contributions made to both stakeholder and to personal pension schemes. All such contributions must be passed across by the 19th day of the month after they have been deducted from the employee's salary.
   Employers must comply with this new legislation by 8 October 2001 at the latest.

• Membership of the scheme must be offered to all employees, including part-time staff, within 12 months of their joining the employer's service.
• Employees may be excluded from the occupational scheme if they are aged under 18 years or are within five years of normal retirement age.
• As a general rule, the employer's contribution should be at least 10% of the total contributions.

• Offer membership of the scheme to all employees aged at least 18 years within three months of their being employed. This includes part-time staff and any contract or temporary staff once they have been employed for three continuous months.
• Pay employer contribution to the GPP for each employee of at least 3% of basic pay period earnings.
• Document the offer of membership and the contribution basis in the individual employees' contracts of employment.
• Impose no exit penalties if the employee decides to stop contributing or to transfer out of the scheme.

Many pension arrangements currently offered by employers will not meet the criteria and will therefore not exempt the employers from the need to offer their employees access to a stakeholder pension scheme. For example, many employers operate waiting periods of more than three months before employees may join their GPP. It is also common for employers to offer membership of their occupational pension scheme to only certain categories of employees.

It is essential for employers to check whether their existing pension arrangements will meet the exemption criteria. If they do not, employers will either have to change their existing conditions or they will have to offer access to a stakeholder scheme as well as their existing pension arrangements.

The changes needed to existing schemes are bound to vary. For example, employers may need to change the eligibility criteria for their occupational schemes, or possible increase the level of contributions to GPPs.

Financial advice will be of considerable help. Employers will need competent professional advice to help assess the options and make the right decisions.