Pension lawyers have admitted their shock at loophole in stakeholder regulations which prevents employers from providing access to the government's flagship pension plan.
The loophole – which allows employers who offer life insurance policies to forfeit their stakeholder obligations – which was first pointed out to the Department of Social Security in January.
But, despite two sets of stakeholder regulations being made since then and nearly six months later the oversight has yet to be plugged.
Hammond Suddards Edge pensions lawyer Ian Greenstreet said: “If you are eligible for an occupational scheme your employer does not have to provide access to a stakeholder scheme. A life cover only scheme under stakeholder regulations, is an occupational scheme for this purpose. So it would seem to defeat the object of stakeholder which is to basically make employers offer a suitable scheme and provide access.”
The DSS said it is aware of the loophole and intend to monitor the situation to establish whether employers abuse the gap. It said setting up a stakeholder pension involves less work and less cost than setting up a life insurance scheme so, therefore, does not expect any widespread cases.
The DSS does fear, however, that employers already offering a life cover scheme may use the loophole to avoid the “hassle” of providing a stakeholder scheme.
Hammond Suddards Edge pensions lawyer Ian Greenstreet warned that employers not to plan their stakeholder on the assumption that this loophole will continue.
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