Workplace Pensions

Also known as Auto-Enrolment. All employers will need to provide a pension for their employees. Each employer has a "staging date". This is the date that a pension must be set up by and offered to it's employees. Employees then have the option of "opting out" and not contributing to the pension, but this does NOT mean that the employer then doesn't have to contribute on their behalf. Here are some key facts on auto-enrolment:

  • Employees earning over £10k p.a, MUST be enrolled into a pension scheme. The employees may then choose to opt out of making their own contributions.

  • Employees earning between £5,832 and £10k p.a have a right to ask to opt in. They are NOT automatically enrolled but have the right to join and if they do so, the employer must also contribute.

  • Employees earning under £5,832 p.a have a right to join a pension scheme, BUT the employer does NOT have to contribute.

The percentage contributions that must be paid into a workplace pension are as follows:

  • To 5th April 2018 - Employer cost is 1% of salary (Employees not opted out is also 1%)

  • From 6th April 2018 to 5th April 2019 - Employer cost is 2% of salary (Employees is 3%)

  • From 6th April 2019 - Employer cost is 3% of salary (Employees is 5%)

For companies that only have directors on the payroll, without an employment contract, and those directors are paid less than £10k p.a, a workplace pension may not have to be set up. You will still need to complete a declaration of compliance with the pensions regulator, otherwise penalties may be levied.

So, how do you go about finding a pension scheme? 

If you wish to review the pension options that are out there and take advice on which pensions are performing well and how fees compare etc, then you must speak to a Financial Advisor. Accountants are not regulated in this area and cannot give you this information. 

What we can tell you is what our experience has been so far of pension providers and how they compare in terms of ease of setup, if they are compatible with your payroll software, and what level of fees they charge.

So far, we have looked at the following. Most schemes can be setup online, but some require a quote request first. Ongoing management and admin by the employer can be done online. In most cases, employees can also access their pension fund online and make choices for their investment. We suggest have a look at the market place and seeing which ones you would like to investigate further. The default option tends to be NEST as this is the pension scheme setup by the government.

NEST

There is currently an annual limit of total contributions per employee of £4,900. There is no employer monthly charge, but the employees funds are deducted 0.75% annually of the total value and also 1.8% of the annual contribution amount.

AVIVA

No setup charge, but there is a monthly employer charge of generally between £25 and £100 p.m. There is an annual management charge to the employee investment fund of 0.75%.

Standard Life

No setup charge. Monthly charges are £100. Currently there is an offer where you do not pay monthly charges until 2017. Annual management charge to the investment fund is 0.75%.

Now Pensions

No setup charge. Monthly charges are £36+vat. Annual management charge is 0.30%. Employees are also charged £1.50 from their investment fund per month.

There are many more pension providers out there in the market place. The above details are subject to change by the providers.