Small companies have been expempted from providing a pension scheme for their staff.

Having originally stated that all companies would be required to provide access to a Stakeholder scheme, the Government has now exempted all companies with fewer than five employees.

The exemption will be reviewed in three years' time.

However, this latest concession, while welcome, is not as generous as the Government may make out, says Stuart Allen, a principal consultant with KPMG Pensions in Crawley.

He said: "It is pleasing to see the Government bowing to consultative pressure and removing the burden of Stakeholder pensions from the smallest businesses. But, for many businesses, the need to cope with Stakeholder pensions remains.

"These companies still have to contend with choosing an appropriate scheme, setting up the logistics for collecting contributions and communicating their decisions to their employees.

"However, it is a welcome decision to let the smallest businesses 'off the hook' in this manner. At a time when businesses are being weighed down by new legislation like the minimum wage and the working time directive, such a considerate move is an unexpected, but pleasant, surprise."

The exemption follows the Government's other concessions on Stakeholder pensions, namely exemption for certain group personal pensions plans provided employers offer a contribution of at least three per cent of earnings.

This exemption will also be reviewed in three years' time.

Mr Allen said the Government has now confirmed that, despite protests from the insurance industry, charges will be limited to one per cent per annum on Stakeholder schemes, meaning that, as predicted, there are likely to be only five or six serious providers of Stakeholder schemes.

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