The law says you have to choose a workplace pension for your auto-enrolment eligible staff. But it doesn’t say how! The Pensions Regulator’s website, while excellent on auto-enrolment compliance, is pretty hopeless in helping you choose a pension.
So we thought we’d produce this handy “cut and paste” guide to choosing a pension, which can sit on any adviser or accountant’s website!
Feel free to share!
The decision you make may have consequences – this ten-point checklist gives you some quick pointers to the kind of pension scheme you should have.
If you want to make an informed choice then we suggest using www,pensionplaypen.com which not only helps you choose, but provides you with an audit trail and actuarial certification of the decision you’ve taken
|What to watch out for||What you can do about it|
|Pension providers who don’t want your business||Check with who you are talking with that you qualify for their service. Do a workforce assessment (you can do one for free at www.pensionplaypen.com); share this with your provider.
Though some pension providers say they take everyone –it is best to check – even NEST doesn’t take everyone (See 6 below)
|Low earners with variable earnings and high earners with tax issues
If you have high earners with complicated tax affairs
|If you have low earners who pay no tax beware schemes that operate a net pay arrangement (you may deprive staff of tax-relief
Talk with your high-earners about tax-relief , they may need advice and could benefit from a net pay scheme
|Mature staff with a long CV
Young tech savvy staff
|Mature staff may have a number of “deferred pensions”, they would benefit from a scheme where they can bring their pots together and use the scheme to get pension freedoms.
If your staff are mainly young and tech-savvy ,look at tech-friendly schemes which offer phone friendly web-services
|Pension gurus on the payroll!||Bring them into the decision making process and make sure you have a way to compare all the schemes they’ll ask you to look at!|
|Complex payroll periods
|Speak with your payroll software suppliers, you may find they can point you to payroll friendly providers.
Payroll software companies have huge experience and will want to help
Declare this to any provider you talk to, Many (including NEST) will only take money from UK bank accounts
|6. Financial education||Staff wanting guidance and education at work||Some providers will allow members to pay for financial advice from their pension fund (adviser charging).
Other providers offer pension training either face to face or thorough distance learning within the standard price. Members cannot be forced to pay for financial advice as this would be considered “commission” and is banned
|Trade memberships||Your or your adviser’s trade association may have special terms with some providers. Examples include the FSB, the ICB and trade bodies for seafarers, charities and social housing organisations.
Even hairdressers have their own “special deal”. Beware , not all these deals are as special as they make out!
|Existing workplace pension(s)||Take great care. Ask your existing provider if your scheme can be used for auto-enrolment and don’t assume it can. Even if it can, it may not be your best bet, shop around before committing.
If you choose a new provider, check you can move the old scheme into the new one and whether this can be done without getting every member’s consent,
|Day traders on your staff||Talk with your staff, you may have an investment guru (or someone who fancies himself one!) There are some schemes that have sections for self-investment.|
Personal Service Workers
|People eligible for a pension contribution you don’t even pay!||Just because you’ve assessed those on your payroll, doesn’t mean you’ve assessed your workforce. You need to check your contractors to make sure they don’t merit membership.
Be sure to tell your provider if you find personal service workers, they may not want to include them which could invalidate your scheme as a qualifying workplace pension
And here are a few questions we are asked all the time!
Should I take independent financial advice?
In an ideal world you should pay for face to face with an independent financial adviser, but they are few and far between and regulated advice is expensive. You can get a 95% solution from a robo-adviser at a fraction of the cost.
How can I stay out of trouble if I don’t?
The main thing is that you know what you are buying for your staff and can explain the basis of your decision. You cannot predict whether the pension you choose will work out the best but if you have a proper audit trail of how you chose the pension, you should be thanked by your staff and stay safe from the risks of litigation.
Will we as an employer be giving advice to our staff?
So long as you don’t tell your staff what to do, you are safe. Choosing a workplace pension for your staff is not regarded by either the Pensions Regulator or the Financial Conduct Authority as a “Regulated Activity”.
What can we tell our staff?
The Pensions Regulator is keen that you promote your workplace pension and encourage pension saving. We recommend that you produce a report for your staff to see that tells them how you made your choice. We also recommend you get your decision certified by a professional such as an actuary so that your staff know you’ve followed due process. Both the report and certificate are part of the service offered by www.pensionplaypen.com