Rich 'hijack' stakeholder market

Stakeholder pensions currently have charges capped at 1%

Stakeholder pensions launched to help low paid workers save have become a "tax dodge", according to the TUC.

The union body has analysed Inland Revenue figures for contributions to the pensions since their 2001 launch.

It found the average saving in an employee's stakeholder plan was £720 a year, including employer contributions.

However, contributions into plans by non-employees - many of them children or spouses of the well-off - averaged nearly £2,000, it said.

The low-cost pensions, with charges capped at 1%, were introduced in April 2001 to encourage saving.

They are clearly a good way for the wealthy to avoid paying tax Brendan Barber, TUC Q&A: Stakeholder pensions

Since October 2001, firms with five employees or more have had to offer their staff access to a stakeholder pension scheme or alternative pension arrangements.

But three-quarters of company stakeholder pensions are "empty shells" with no active members, research published previously has shown.

"There is nothing wrong with stakeholder pensions in principle, but we now know conclusively that without an employer contribution they will make little or no impact on our pensions crisis," said Brendan Barber, general secretary of the TUC.

"On the other hand they are clearly a good way for the wealthy to avoid paying tax."

In a statement, the Department for Work and Pensions said that in the last tax year around £2bn had been contributed to stakeholder pensions - with around £570m of that coming from employers.

However, it said that more employees should be saving for retirement.

"The government established the Pensions Commission to evaluate whether there is a need to go beyond the current level of compulsion in the pension system, as well as to monitor and assess trends in long-term savings."