Like it or not,solution or dud, Stakeholder pensions are coming, so be ready, warns GERRY GRAY a partner with Grosvenor Financial Consultants, York

CONTROVERSY has been rumbling along ever since the 75p derisory rise in the State pension in April and it rose to a crescendo during the latest Labour Party Conference in Brighton.

The row has masked the fact that October 1 was countdown day to start of Stakeholder pensions which finally go on sale from April, 2001 and which will be obligatory for employers from October 8, 2001

What is the connection between today's controversy and Stakeholder pension? With a surplus, the Government has to respond to the demand for higher pensions. Yet, despite the appalling publicity and loss of support in opinion polls the cabinet is refusing to restore the link between pensions and average earnings. Why the obstinacy?

The simple truth is that with an ever-increasing number of pensioners and a faltering birth rate there will be insufficient tax take in the years ahead to pay for the pensions even at current levels let alone pensions increasing in line with wages.

So the aim is to encourage all workers to invest in pension schemes regardless of their income level and to enable this employers must offer employees access to a Stakeholder pension.

Let's face it. Many people look askance at pension companies and pension salespeople. The mis-selling scandal of the late 1980s and early 90s left its legacy of mistrust.

So stakeholder pensions are cheaper and more flexible to counter the suspicion.

The problem is that these costs have been reduced to a level where there is insufficient money to permit any level of free advice to businesses. I fear that salesmen will only arrange Stakeholder pensions if they piggyback to the sale of other more rewarding financial products.

So what does it mean to employers and who will be affected? Revenue guidelines issued to all employers, suggest you will be required to offer a Stakeholder pension if you employ five or more people full or part time; or if you do not offer a pension scheme for your staff.

Even if you do offer a company pension scheme it may not exempt you from the Stakeholder regulations and you should seek professional advice.

So what are your legal responsibilities? You have to choose and nominate your approved pension provider, offer all your employees membership of the plan and provide them with the basic information and explanatory material.

You have to deduct the contributions that each employee wishes to make from their wages and remit the monies to the pension provider within 19 days of the end of the period in which the deductions were made. You have to offer the same facilities to all new employees within three months of starting their employment.

You are not obliged to offer any advice on the plan and you are not responsible for the performance or, perhaps more relevant, any lack of performance of the pension fund.

The question now is, will Stakeholder pension be the solution, and can future governments be saved the embarrassment of angry pensioners complaining about their standard of living? Answer: It hasn't a prayer. You can lead a horse to water but you can't make it drink.

Savings in the UK have fallen to a 35-year low and still dropping. Employees tend to prefer higher wages rather than benefits, such as membership of a pension. Bosses may be compelled to offer pensions, but workers are not obliged to take them up. Such is the formula for a bureaucratic tangle, another drag on competitiveness and yet more employer disenchantment with New Labour.

These are sacrifices not worth making given that the pension is no solution to the problem of poverty in retirement. Expect the whole subject to be re-visited yet again.

In my lifetime we have had Graduated Pensions, which were then dropped and replaced with State Earning Related Pensions (of which we have had two versions) and now Stakeholder. None of these provided the answer.

So what should employers do? If they do the least necessary to avoid prosecution, some responsible staff, conscious of their future needs will feel disgruntled. It would be advisable therefore to call in a professional independent adviser and talk the subject through.