Although you have a reasonable amount of freedom when you choose your pension scheme for automatic enrolment, it’s important to be aware of the fact that there are a number of legal obligations that you’re required to fulfill.
Although there are plenty of people around to help you in your decision-making process, from The Pensions Regulator to Independent Financial Advisors and your accountant, it’s important to have some understanding about the choices open to you and the scheme requirements.
In this article we’ll share with you the options that are open to you in order to give you a good overview, but seeking professional advice before making any final decision makes not only good business sense, but will probably help you save money in the long run.
Why taking your time to make the right choice is essential
Like all things in life, choosing the right pension scheme to fulfill your pensions automatic enrolment responsibilities takes time. As well as taking time to choose the right scheme, it’s worth investing the required time to shop around to make sure you have the best advisors on side by the time you reach the Staging Date of your business.
The importance of value for money and good administration
It may sound obvious, but a fundamental requirement when making your scheme choice, is being aware of the importance of choosing a pension scheme that is of good quality and is well run. By doing this, your workers will get value for their money and their funds will be protected. Like most other things, there are good and not-so-good pension schemes and selecting the best for your business’ unique circumstances might take you a bit of research and will call for some time investment, but shouldn’t cost you any more than selecting a bad fund; so it’s time well spend.
Using an existing pension scheme
If you already have a pension scheme in place that fits the auto enrolment requirements, you may be able to use your existing scheme for auto enrolment purposes and this is well worth checking out before engaging yourself in a new scheme. The Pensions Regulator website has a useful tool for determining whether your existing scheme is appropriate.
Choosing a new pension scheme
There are several obligations when it comes to choosing the right fund for your business, but one of the key things to bear in mind is that your employees must not be required to give their consent to join. The Pensions Regulator website is a great place to find out exactly what your obligations are in terms of choosing a fund that doesn’t require any consent, but equally your IFA or your accountant will guide you to make sure you make the right selection.
If you don’t have a scheme in place, the chances are a Defined Contribution or Money Purchase pension scheme will work out best. These schemes might fall under the category of a master trust or a group personal pension scheme. Either way, the final benefits are dependent on the investments made, the performance of those investments, the age at which your members decide to retire and the cost of the investment vehicle both during its lifetime and at retirement.
The trustees of some master trust pension schemes have had their schemes independently reviewed so that they are able to demonstrate that they meet certain standards of governance and administration. Currently the pension schemes that have master trust assurance and are open to small employers are:
In addition, NEST (National Employment Savings Trust) is a master trust that has been set up by the government to give employers access to a quality pension scheme that fulfills the requirements of automatic enrolment. As such it is obliged to accept all employers who wish to join it.
Help is at hand
If you’d like help to make sure that you make the right choices regarding your pension scheme for auto enrolment purposes, why not get in touch? We are fully conversant with auto enrolment requirements and can help you make the best decisions for your unique circumstances.