Stakeholder pensions are failing low-pay workers, TUC claim

Low paid workers are not getting the benefit of stakeholder pensions as employers are not contributing enough to make any headway in staving off Britain's looming pensions crisis, the Trades Union Congress (TUC) has claimed.

The TUC also claimed that the well-off were "hijacking" stakeholder policies, created to help the lower paid worker, as a "tax dodge".

TUC-backed research found that the average contribution to an employee’s stakeholder pension was just £720 a year – including employee and employer contributions. However, many children or spouses of the well-off have been taking advantage of stakeholder tax breaks to make contributions into plans averaging nearly £2,000.

Anyone under 75 and not earning more than £30,000 a year can take out a stakeholder pension and attract full tax advantages. The wealthy can therefore provide stakeholder pensions for any non or low earners in their family - such as children, students and non-working spouses - and attract considerable tax advantages, the TUC said.

New analysis of Inland Revenue statistics by the TUC shows the different contributions made by employees and other groups. Up to now only a figure for the overall average contribution to all stakeholders of about £1,000 a year had been available.

The new analysis also reveals that only 680,000 employees are contributing to a stakeholder pension - 2.6% of the employed workforce.

"As many of these will be top-up pensions held in addition to an occupational pension, this is further evidence of the failure of stakeholder pensions with no employer contribution to encourage the take up of pensions by the lower paid," the TUC said.

General Secretary Brendan Barber added: "These figures show that stakeholder pensions are a bigger failure than we thought. They were meant to get the low paid saving, but few have been taken up, and, as these figures show, contributions to employees’ stakeholder pensions are even lower than previously estimated.

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

(gmcg)