Pensions warning to small firms

Future pensioners will have a cheap way to boost their state pension

Two thirds of small companies in the UK - nearly a quarter of a million - risk fines of up to £50,000 because they are ignorant of stakeholder pension regulations.

New laws coming into force next year oblige every company with more than five employees to set up a stakeholder pension scheme.

But a survey suggests that two-thirds of the UK's 365,000 small companies without a pension scheme are not aware of the new pension law.

The government hopes that stakeholder pensions will give five million people access to affordable company pensions for the first time.

Hefty fines

Companies that fail to comply will face hefty fines this time next year.

Research by insurance giant Axa, however, suggests that many firms are not prepared. 540 directors of small companies were asked what they knew about stakeholder pensions.

Two-thirds had no idea that they will be legally obliged to set one up.

If the sample is representative for small firms in the UK, then more than 230,000 companies could find themselves breaking the law next year.

The maximum fine is set at £50,000 each.

Flagship policy

Pension providers want the government to do much more to promote stakeholder pensions and make sure its flagship welfare policy does not become a flop.

The scheme comes into force in April 2001.

Companies that want to set up a stakeholder pensions scheme, have to register with the Department of Social Security (DSS) and the Occupational Pensions Regulatory Authority (Opra).

The DSS and Opra have set up special web sites to advice companies how to sort out the paperwork.

The government wants stakeholder pension schemes to reach those earning between £10,000 and £20,000 a year, but wants them to be made available to everybody including people in employment, fixed contract workers, the self-employed and people who are not actually working but can afford to make contributions.