Ask the expert: Work pensions

BBC News Online's Ask the Expert column gives readers a chance to have their financial questions answered.

This week, Malcolm McLean, chief executive of the Pensions Advisory Service (Opas) helps Your Money reader Lisa Carter.

Ms Carter wants to know whether companies are obliged to offer pension schemes to their employees.

She is enquiring on behalf of her father, who has worked for the same small company for 12 years. She says the firm has never offered him a pension scheme.

Malcolm McLean writes:

There is no legal requirement for companies to run pension schemes for their employees or to contribute financially to any other pension arrangement they (the employees) themselves may have.

Since October 2001 the law has changed to the extent that employers with five or more eligible staff have to provide "access" to a stakeholder pension scheme for their employees.

"Access" means no more than simply that the company has to provide a facility whereby employee contributions, if they so wish, are deducted from their pay and are passed over to the scheme.

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In setting up such an arrangement, the employer should have consulted with its employees on the choice of a suitable stakeholder scheme provider and then have notified all eligible employees of its final selection.

Because neither the employee nor the employer are forced to contribute, many of these schemes exist in name only, i.e. they are empty shells with no members in them.

This is a great pity, much to be regretted, and means that many individuals who should be making provision for themselves are not being encouraged to do so.

Despite some of the difficulties which have existed in recent years, workplace pensions are still by far the best option for most people seeking to build a comfortable retirement income - yet millions of working Britons , particularly those working for smaller firms, do not benefit from an employer sponsored scheme.

MALCOLM'S ANSWER: IN SUMMARY Firms with five or more employees must provide "access" to a pension Four out of five companies with more than 1,000 employees offer pensions One in seven firms with fewer than 50 employees offer pensions Pensions Commission: Looking at compulsion Employer's Task Force: Investigating incentives to support and encourage employers running schemes Pensions working group: Looking at encouraging multi-employer group pension schemes

The government is aware of the problem and the need to address it.

They have set up a Pension Commission under a former Director-General of the CBI, Adair Turner, to consider in the longer term the whole question of compulsion and what can be done.

There is also a Employers' Task Force looking at incentives which might be possible to support and encourage employers to run occupational schemes.

Finally, and specifically with smaller employers in mind, there is an initiative in hand for those companies who might currently find it too difficult to operate an occupational pension scheme on their own.

A working group, which includes representatives from the Inland Revenue and the National Association of Pension Funds (NAPF), is looking at ways to encourage multi-employer pension schemes, a sort of grouping arrangement which would take the hassle and cost of running individual schemes away from smaller employers.

At present, four out of five companies with more than 1,000 employees offer an occupational scheme, compared with only one in seven firms with fewer than 50 employees.

The working group's remit is to identify obstacles to the development of such plans, especially through the tax regime, and to find ways in which the NAPF can provide practical help in setting up multi-employer schemes.

We must hope that one or other of these studies bears fruit and the decline in and lack of availability of good quality workplace pension provision is improved before too long.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.