This section defines the obligation of employers to provide access to stakeholder pension schemes. Subsection (1) provides that, unless regulations state otherwise, any employer who employs relevant employees (subsection (8) refers) must comply with the requirements set out in this section.
Subsections (2),(3),(4), (5) and (6) define the scope of this requirement.
Subsection (2) provides that employers must choose one or more registered stakeholder schemes, at least one of which offers membership to all employees.
It is anticipated that trade unions or other membership organisations may set up schemes which are open only to members; if an employer chose such a scheme, and had any employees who were not members of such an organisation, he would have to choose an additional or alternative scheme which was available to all.
This subsection requires the employer to make sure, on an ongoing basis, that the designated scheme/s is/are registered. The intention is that an employer should ensure that “at all times” he has a designated scheme which is registered as a stakeholder scheme. Employers will, therefore, need to check, from time to time that the designated scheme/s remain on the OPRA register.
The subsection also provides that employers must consult with employees and any organisation representing them, such as a trade union, about the choice of scheme.
Subsection (3) provides that the employer must inform his employees of the name and address of each designated scheme.
There is also a power to prescribe other information about a designated scheme which the employer must provide – which gives some flexibility to modify the requirement in the light of experience of operating schemes.
Subsection (4) provides that the employer must allow the scheme “reasonable access” to the relevant employees in order to provide information about the scheme. What is “reasonable” is likely to vary according to the nature and size of the employer’s business but this could involve the holding of workplace meetings or the distribution of information through pay packets.
Subsection (5) provides that where an employee who is a member of a qualifying scheme so requests, the employer must deduct the employee’s contributions from his wages and pay them to the chosen scheme.
The intention is to strike a balance between costs to the employer and flexibility for the member, so there is also a regulation-making power to prescribe restrictions on this requirement.
For example, the consultation document on employer access proposed a limit on the frequency with which an individual could change their contributions through the payroll to 3 monthly intervals. A further power to make regulations provides for deductions to be paid to a person other than the chosen scheme. There has been consultation, on the establishment of a clearing house to receive contributions. Although it was proposed that a clearing house should not be set up at this stage it is still a possibility for the future. If this was the case this power could be used to enable employers to pass contributions to it rather than direct to schemes.
Subsection (6) provides that an employer should withdraw his designation of a scheme if it ceases at any time to be registered as a stakeholder pension scheme. In some circumstances a scheme which has lost its status as a stakeholder scheme may be able to continue to operate; if the employer’s designation continues, that could mislead his employees. The intention is to allow employers a reasonable period of time to respond to a loss of registration by a designated scheme.
Subsection (7) applies the civil penalties contained in section 10 of the Pensions Act 1995 to breaches of the employer access requirement.
Subsection (8) provides that an employer is not under any duty to make enquiries or judgements, or act on information about a designated scheme, other than such as are necessary to fulfil the obligations set out in section 3.
Subsection (9) defines the terms “employer”, “qualifying schemes” and “relevant employees” for the purposes of this section.
	“Employer” means any employer, whether or not resident or incorporated in any part of the United Kingdom.
	A “qualifying scheme” is the employer’s designated scheme (or schemes), or if regulations provide, any other stakeholder pension scheme. Initially, it is intended that employers would only be required to make deductions on behalf of employees who are members of their designated scheme(s). If, in the future, arrangements such as the clearing house are developed, which minimise the additional costs to employers of making payments to a number of different schemes, the regulation-making power will enable the requirement to be extended to other schemes.
	“relevant employees” are all employees of an “employer” employed in Great Britain and, where an employer is resident or incorporated in any part of Great Britain, all employees employed outside the United Kingdom. Exceptions are those who are eligible to join that employer’s occupational pension scheme and those who earn less than the lower earnings limit (defined in section 181 of the Pension Schemes Act 1993). The power to prescribe other classes of employees provides some flexibility to modify the requirement in the light of experience of operating schemes.
The definitions of “employer” and “relevant employees” ensure that the employer access requirement will cover all employers in respect of their employees in Great Britain, and employers based in Great Britain in respect of certain employees outside the United Kingdom. The latter provision is intended to ensure that those working abroad for limited periods are not excluded from access to a stakeholder pension scheme.
Commentary on Sections Commentary Section 3: Duty of employers to facilitate access to stakeholder pension schemes