For your employees, having a workplace pension is a must.
It will increase their retirement savings and improve their financial well-being in the short term, allowing them to be more productive.
On the other side, locating one can be difficult. Since the introduction of auto-enrolment, many providers have jumped at the chance to offer their workplace pensions.
We’ll walk you through some of the legalities and show you how to pick the best workplace pension provider for you in this post, which includes a list of workplace pension scheme providers to help you out.
Is it mandatory for small enterprises to provide a pension?
Yes, by law. All businesses must enroll their employees in a pension plan and contribute to it under the Pensions Act of 2008. Businesses that are hiring for the first time must also follow the rules.
Auto-enrolment is required for anybody over the age of 22 who earns more than £10,000 per year, £833 per month, or £192 per week. Even if you just have one qualifying employee, this rule still applies. You’ll face fines from The Pensions Regulator if you don’t put one up, and you may have to backdate payments from when your employee started working for you.
If you’re unsure about your responsibilities, The Pension Regulator provides an online tool to assist you.
What is auto-enrolment, and how does it work?
Auto-enrolment is a government-mandated pension program in which employees are automatically enrolled. A set percentage of their wages is deposited into their pension scheme, with you, the employer, contributing an additional percentage. Contributions must equal at least 8% of eligible wages at writing, with the employer paying at least 3% of that.
There are several different pension plans, so here’s a simple glossary.
Defined Contribution: Also known as money purchase plans, defined contribution plans are based on an agreement between employers and employees to contribute a certain percentage of their income to a pension fund. Your pension provider then invests the funds you have contributed. It’s the most common plan on the market.
Defined Benefits: These are determined by a member’s salary and length of service with the company. In contrast to DCs, the revenue generated is not determined by market performance.
GPPs are group personal: pensions managed by a pension provider. Employees will be enrolled in the pension plan of said provider. The employer collects member information and then sends it to the provider. Members contribute to their pot, which is then dispersed through stocks, shares, and other investments.
Master Trust: A Master Trust is a type of Defined Contribution plan managed by an independent board of trustees to provide pensions for several unrelated companies. When you choose a master trust, you don’t have to worry about deciding who will operate the scheme or drafting individual regulations. This makes administration easier, and you’ll still have control over contributions, where the money in the plan is invested, and what benefits your employees receive.
SIPP (Self-Invested Personal Pension): A SIPP is a self-directed pension that allows your employees to choose how their contributions are invested. It’s preferable for more experienced employees already familiar with the market and has more money to invest. When doing your study, you’re more likely to come across a Group SIPP, a collection of individual SIPPS collected together.
How much does matching employee contributions cost my company?
It is determined by how much your employee contributes. Matching your employees’ efforts encourages them to contribute more.
Employer contributions are also deductible as a business expense, allowing you to decrease your corporation’s tax payment by deducting them from taxable profits. It is also unnecessary to pay National Insurance on pension contributions.
Choosing a pension provider for the workplace
First and foremost, you must take your time and locate something appropriate. “It should be part of their plans at that stage, when they’re starting to complete their incorporation, setting up the firm,” David Pye, client consulting director at Broad stone, told Small Business. “We frequently receive contact from a company with a new employee starting next week and requires a legal pension plan.” But time is of the essence. It’s not a pleasant, relaxing [time] in which to make a rational decision.”
“It’s critical to analyze exactly what is covered as part of the package on offer when looking for a pension provider for your workplace scheme,” Jonathan Sidlin, managing director of HSC Financial Advisers, told Small Business.
“Confirm that the pension provider has access to a diverse fund portfolio and can give various investing possibilities.” Many providers have competitive plans in place primarily for small business owners, which we find especially beneficial to our clients,” he added.
So, what exactly should you be on the lookout for?
Eligibility
Although it may not appear so at first look, inquire with the provider regarding eligibility. Depending on the number of employees, some larger companies may have restrictions on the size of business they allow. According to Pye, “a handful of the major providers will have a five-employee minimum.” “This does not imply that there must be five persons in the scheme, but five employees must be.”
If you have fewer than five employees, he recommends Master Trust providers: “Master Trust providers tend to be Smart Pensions, The People’s Pension, and NEST, to name three that are extremely common for very small enterprises, to begin with.”
Fees
It’s tough to obtain a sense of prices upfront because many pension plans are tailored to the company’s needs. Depending on the assets being handled, a tiered billing structure may exist. Sidlin also advised getting a feel of the annual management fees and total expense ratio (a measure of the total cost of funds to the investor) on any funds available in the scheme.
“Most charges will come from membership, especially with small schemes,” Pye said. “Some suppliers would charge an implementation fee, usually between £300 and £500, to put something in place.”
If big sums of money are held, there may be costs. “Some of our clients have funds worth over £100 million, and that money requires some governance structure, even though it is not legally the employer’s duty.” As a result, you’d set up an annual evaluation. “Things like that may be put in place for roughly £2000 a year,” Pye said.
Investing possibilities
Consider the nature of your firm and the types of employees you wish to hire today and in the future. For example, employees in the banking or technology industries may be enticed by more appealing pension investment alternatives. Similarly, if you’re a socially conscious company, a pension provider that invests in environmentally friendly investments or allows employees to choose more ethical investments could provide you an advantage over your competitors. Take note of the returns over five years, for example.
If you only want to make sure you’re compliant, the National Employment Savings Trust (NEST) is a good place to start. It may end up being a simpler and better solution for you.
Communications
Examine what useful information is offered for both you and your staff. Written or video guides, interactive tools, or a financial well-being portal could all be included. It’s also good to inquire about how the supplier interacts with you and your team about changes and critical correspondence.
ESG certifications
As more investors express an interest in environmental and social governance (ESG), more workplace pension providers concentrate on it. This could be accomplished by measures such as carbon offsets or shareholder power.
Changing the pension provider at work
You may already be aware of this and are simply looking to switch providers. Give the transition three months if this is the case. It could be done in less time, but I wanted to be on the safe side.
The issue arises when it comes to transferring payments between your staff. “In terms of picking up monies that have already been invested, which may have been invested for two or three years or longer, the employer does not have the right to do so; it must be an employee choice,” Pye explained. “Ideally, you’d assist the employees in this. It’s not a tough procedure, but they must be informed.”
Who is the greatest provider of employment pensions?
There is a lot to consider when comparing workplace pension plans. To understand what’s available, start with an online search. It’s advisable not to rely on it too much, as you can miss out on a company that offers a better deal deeper down the search engine rankings. With this comes the risk of having too many options. “There’s a risk that a three-man business in operation for six months gets a full market analysis, and 60-70 percent of the market won’t entertain them because they’re too little.”
If you have any co-directors or consultants, discuss it with them and get their feedback. If possible, seek the advice of a financial expert.
Providers of workplace pensions
Meanwhile, here are some of the most popular workplace pension providers, along with a summary of significant characteristics.
Provider | Types of pension | Fees | Integrations |
---|---|---|---|
Aegon | Master Trust, Direct Contribution Contracts | Up to 0.60 per cent annual percentage charge based on fund value | HR, payroll |
Aviva | Master Trust | Dependent on scheme. Employees also pay a fund charge between 0.2 per cent and 0.75 per cent per year | Payroll |
Cushon Master Trust | Master Trust | Standard annual management charge is 0.55 per cent for companies with ten or more employees and 0.65 per cent for companies with fewer than ten employees | Benefits |
Fidelity | Master Trust and Group Personal Pensions | Based on client needs | None |
Hargreaves Lansdown | Group SIPP | Not stated | None |
Legal & General | Master Trust, contract and trust-based pensions | Not stated | None |
NEST | Master Trust | Annual management charge of 0.3 per cent of total value of member’s fund and a contribution charge of 1.8 per cent on each new contribution made into a member’s pension scheme | Payroll |
The People’s Pension | Master Trust | Annual charge of £2.50 – equivalent to 21p a month, management charge of 0.5 per cent of the value of a member’s pension pot each year, rebate on the management charge, giving back between 0.1 per cent on savings over £3,000 and 0.3 per cent on savings over £50,000. One-off set-up fee of £500 + VAT for employers – this can be reduced to £300 if you go through a business adviser. Employees will be subject to an annual 0.5 per cent management charge | Payroll |
Royal London | Group Personal Pensions | Not stated | None |
Scottish Widows | Group Personal Pensions | Average 0.46 per cent charge per year (2020) | None |
Smart Pension | Master Trust | Monthly account charge of £15 + VAT. No charge if you pay contributions by direct debit, £30 a month if you pay by BACS. Members whose employers have signed up directly have an annual management charge of 0.30 per cent and a monthly fee of £1.25 | Payroll |
Standard Life | Master Trust, Group Pension Plans, Group SIPPs | Not stated | None |
True Potential | Personal Pension | Fund cost is 0.31 per cent plus a platform fee of 0.40 per cent, totalling of 0.71 per cent | Payroll |
Aegon
Master Trusts and Direct Contribution Contracts are two types of pensions.
Fees: Annual percentage charge of up to 0.60 percent based on fund value.
Aegon is one of the major pension providers in the UK, with over 10,000 employer schemes and over 920,000 members’ money under management. It claims to offer a comprehensive set of savings alternatives “that can fit every employer’s needs, regardless of size, complexity, or future ambitions.”
Features
- Employers’ financial well-being hub
- SmartEnrol automates qualified employees’ enrollment and re-enrollment in your pension plan, saving you time and money.
- HR and payroll systems integration
Aviva
Types of pensions include Master Trusteeship.
The scheme determines fees. Employees must also pay a yearly fund charge of 0.2% to 0.75 percent.
Aviva offers several online guides to assist you in figuring out your employee’s pension scheme without having to contact customer care. Aviva may demand a certain number of contributing employees to sign up.
Features
- There are no setup costs.
- The setup is simple.
- 200 investment fund selections on a free online management dashboard
Master Trust Cushion (formerly Salvus Master Trust)
Types of pensions include Master Trusteeship.
Fees: The standard yearly management charge for businesses with ten or more employees is 0.55 percent, and for businesses with fewer than ten employees, it is 0.65 percent.
Cushion, which bills itself as the world’s first net-zero pension, promises a true investment in your employees’ future and a jargon-free experience so they know exactly what they’re getting. However, compared to some of the other providers, there are just 90 investing alternatives.
Features
- Connects to your current benefits platform
- Encourage employees to save and plan for their retirement.
- App-enabled Employees can participate in ESG voting to have a voice in how the companies they invest in behave.
- Employees hampered by the Lifetime Allowance, Money Purchase Annual Allowance, or Tapered Annual Allowance
Fidelity are eligible for assistance.
Master Trust and Group Personal Pensions are two types of pensions.
The needs of the client determine fees.
With Fidelity, flexibility is the name of the game. Fidelity and other prominent fund managers offer a wide range of management techniques, asset classes, and risk profiles for their funds. Even though Fidelity has no qualifying requirements, it claims to focus on larger business clients.
Features
- Options for a flexible retirement
- Solutions based solely on investment
- Capabilities for workforce management
- Flexible alternatives within the plan, including regular income drawdown
Hargreaves Lansdown is a law firm based in the United Kingdom.
Pensions come in various forms, including group pensions and individual pensions. SIPP
Fees are not specified.
Payments to the Group SIPP are put in a low-cost investment fund, comparable to the Group Personal Pension. This is unquestionably a pension for employees who want to invest their money. On the other hand, HL specialists assist employees in making their own investment decisions by providing investment ideas and pre-made portfolios. Most small businesses are eligible for the program, although those with 50 or more employees are more likely to use it.
Features
- There are many funds and investment opportunities to choose from.
- Apply in a variety of ways
- Employees have a variety of retirement fund alternatives.
General & Legal
Pensions include master trusts, contract pensions, and trust-based pensions.
Fees are not specified.
Legal & General offers a variety of savings choices, including salary sacrifice if it is more convenient for employees. Employees are prioritized with a financial wellness center, and retirement options include a cash lump sum, a flexible income, annuity, and transferring pension benefits.
Features
- Standard, customized, and investment-only investments are also available.
- Enrolment service tailored to your needs
- Tool for retirement planning
- Budgeting software
- System for managing schemes online
The National Employment Savings Trust (NEST) is a non-profit organization (NEST)
Types of pensions include Master Trusteeship.
Fees: A contribution charge of 1.8 percent on each new contribution made into a member’s pension scheme and an annual management charge of 0.3 percent of the total value of the member’s fund.
The government established the National Employment Savings Trust (NEST), a popular beginning place for most firms, particularly microbusinesses. It is one of the cheapest workplace pension providers due to its minimal fees. It aids businesses in meeting basic compliance requirements, but it lacks the investment alternatives offered by some of the other providers.
Features
- There are no shareholders or owners.
- Fees are low.
- One of the few programs available to all businesses.
Pension for the People
Types of pensions include:
Master Trusteeship
Fees: Annual fee of £2.50 (equal to 21p per month), management charge of 0.5 percent of a member’s pension pool each year, management charge rebate of 0.1 percent on savings above £3,000 and 0.3 percent on saves over £50,000.
Employers must pay a one-time setup charge of £500 + VAT, which can be lowered to £300 if you use a business adviser. An annual management charge of 0.5 percent will be imposed on employees.
As its name implies, the People’s Pension intends to be simple and accessible to the general public. It has a lower focus on shareholders than NEST, but it also provides more investment alternatives.
Features
- Support to ensure that your small business is auto-enrolment compliant.
- The default fund, which most members invest in, is MSCI AA rated, making it an ESG leader.
- Compatible with the most popular software programs
- All new contributions are invested in net-zero projects.
London is the capital of the United Kingdom.
Types of pensions include Personal Pensions for Groups.
Fees are not specified.
Royal London’s pension offering can be tailored to your company’s specific needs. Employee contributions and retirement plans are flexible. Your employees agree to give up a portion of their pay, bonus, or redundancy package for a higher company contribution. They can switch to a different plan that allows them to take a regular income when they need it via income drawdown. They can also make contributions through salary exchange.
It’s worth noting that it’s only available through financial advisers, so it’ll be more expensive upfront.
Features
- Training and one-on-one assistance are available.
- Transferring from another provider is free.
- When the company is doing well, Royal London aims to share gains with scheme holders.
- Create a branded employee engagement portal for your company.
- Get scheme governance reports to see how engaged your workforce is.
Widows from Scotland
Types of pensions include Personal Pensions for Groups.
Fees: An annual fee of 0.46 percent is charged on average (2020)
Scottish Widows is trying to include environmental, social, and governance (ESG) factors into their pension portfolios and provide you with continuing support during the life of your pension plan.
Features
- Employees can use a free digital pension transfer service.
- Several investment choices are available.
- Tailored bulk annuity solutions, and insurance policies purchased by pension scheme trustees to better secure members’ benefits.
Pension Plan for the Future
Types of pensions include Master Trusteeship.
Fees: £15 + VAT each month for an account. If you pay by direct debit, there is no fee; if you pay by BACS, there is a monthly fee of £30. Members whose companies have signed up directly pay a 0.30 percent yearly management fee and a £1.25 monthly fee.
Smart pension takes pride in being a digital-first choice that makes it easier for companies to manage their ongoing activities with its automated technology. It’s also ISO27001-certified, which means your information is safe and secure.
Features
- 70% of the default investment plan is invested in long-term investment funds.
- Integration with payroll
- In just a few minutes, you may create an account.
- Employee incentives that allow them to save money at large retailers
Standard Life Insurance Company (Standard Life)
Master Trusts, Group Pension Plans, and Group SIPPs are examples of pensions.
Fees: None provided
A major player For individuals unfamiliar with auto-enrolment, Standard Life presents a wealth of information. They intend to make things as simple as possible for your employees by providing retirement planning guidance and aid when it comes time to retire. If you’re already with another supplier, you have the option to switch.
Features
- Employees can take advantage of an in-scheme drawdown plan.
- Annual management costs that are competitive
- Employees’ annual pension benefit statements
- Web-based administrative center
True Capacity
Types of pensions include Master Trusteeship.
Fees: The fund costs 0.31 percent plus a 0.40 percent platform fee for 0.71 percent.
It’s auto-enrolment on autopilot, according to True Potential. It may handle various tasks for you, such as communicating with employees, tracking contributions, and registering eligible employees.
Features
- Integration with payroll
- Employees can invest in True Potential portfolios only available to True Potential employees.
- NEST offers a variety of risk-rated investment funds that are simple to move from.
I’m still undecided about a workplace pension provider; where can I get further information?
Because this is a hard and essential decision, you should take your time to make sure it’s the perfect one. Speak with a financial advisor who isn’t affiliated with any company (IFA). You can locate them on unbiased.co.uk, where you may alter your criteria to select one that specializes in pensions.
More information on workplace pensions can be found here:
Auto-enrollment for employees and workplace pensions