As an employer, one of your main responsibilities is to select a pension provider. Most people don’t know anything about pensions so having to select one for their employees is a daunting prospect.
With Auto-Enrolment (the process introduced by the government that requires all UK businesses to provide their employees with a pension scheme) having been implemented in many organisations, the need to offer your staff an appropriate pension has become even more important to get right. (Find out more about Auto-enrolment here) In a two-part series, Pauline Green of QuickBooks talks through some of the key considerations you’ll have to think about when selecting a provider.
How long does it take to select a provider?
It can take a couple of months to choose and set-up a scheme, so don’t leave it too late to get going. Ideally, you want to have a pension scheme chosen and set-up about 3 months before your Staging Date. (Not sure what a Staging Date is? Have a look here.)
How do I select a Provider?
When selecting your pension provider, it is good practice to record why you have selected the particular pension and why you have ignored others. Although it’s not a legal requirement, it is good due diligence to show how you arrived at your scheme choice (e.g. to show your employees why you selected the preferred provider)
If you want more information on how to select a pension scheme that suits your business, you can look at The Pensions Regulators guide
What are the different types of pension providers?
- A Master trust is a multi-employer occupational scheme where each employer ideally has its own, effectively ring-fenced, division within the master arrangement
- Master trusts are relatively cost effective with lower charges and offer greater simplicity and expediency
- Master trusts can mitigate governance concerns in a cost effective way.
- Insurance Providers
- These provide personal pensions – i.e. to the individual employee
- The fees can be higher, including set-up costs, annual charges and on-going management charges
- Their fees may include a payment to your IFA
Note: Government legislation has restricted the charge applicable to certain schemes:
- From 6 April 2015 certain pension schemes used by employers to meet their automatic duty (qualifying schemes) will be subject to a charge cap of 0.75% of funds under management within the default arrangement, or an equivalent combination charge
- The cap applies to all scheme and investment administration charges, excluding transaction costs & a small number of other specified costs & charges
We’ll be posting the second half of how to select a pension provider in the next few days, but in the meantime, if you need to get more information on how Auto-Enrolment affects your employees, as well as understanding who is eligible for a workplace pension, please visit our Small Business Centre.