Workplace Pension Schemes For Startups

If you're building a startup company and plan to employ people, you need to consider your options for a workplace pension plan because they are becoming a legal requirement for all UK employers.

“Automatic enrolment” – whereby employers must automatically enrol employees on a workplace pension scheme – is currently being phased in. It became compulsory for the UK’s largest employers in October 2012, and by February 2018 all employers will need to comply.

The date upon which automatic enrolment becomes compulsory for a company is known as the “staging day”. This varies depending on the number of employees on the payroll and the year the company was started. To find out your company’s staging date, visit the Pension Advisory Service’s website here: http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx.

Employees need to be automatically enrolled if they are aged between 22 and the State Pension age, earn at least £10,000 a year and work in the UK.

So the big question is, what kind of company pension scheme do you choose for your employees?

Your plan needs to comply with certain legal requirements. For example, the scheme must not require the employee’s consent to join, it must allow workers to join from their first day of employment, it must be tax-registered in the UK and allow for the minimum legal contributions from employers and workers.

You should look for a well-run pension scheme offering value for money and protection for your employee’s retirement savings. The following information will help you.

### Defined contribution schemes

Most employers choose a “defined contribution” pension scheme (sometimes known as a “money purchase” scheme) for their workers. The employer and employee make payments into the scheme and a retirement fund is built up, with the money invested by the pension provider to create more value. The amount received by the employee upon retirement depends on how much has been paid into the scheme, how well the chosen investments performed, the age of retirement and the cost of turning the investments into a retirement income.

Group personal pensions and master trusts are the most popular types of defined contribution schemes. These are usually run by large, specialist pension providers.

A master trust has been set up by the government, ensuring employers have access to a scheme to help them comply with automatic enrolment; it’s called the National Employment Savings Trust (NEST) and it has a public service obligation, meaning it must accept all employers who select it as their automatic enrolment scheme provider.

However, you are free to choose any scheme that complies with the requirements of automatic enrolment.

### What to look for in a scheme

It’s important that the structure and setup of the scheme you choose is easily understandable, both for you and your employees. It’s also essential that workers are protected even if they don’t actively make decisions about their pensions.

The pension scheme provider should regularly send information to members explaining: how much money has been saved; how the funds are being invested and how those investments are performing; what their projected savings will be at retirement; how much is being taken in charges; and what kind of retirement income can be achieved at the current rate of contributions.

Check whether the investment options in the scheme qualify for protection and compensation. Providers of group personal pensions or master trusts should offer clear information on the compensation available to members.

Here are some more questions you could ask potential providers:

* Are the people making decisions about investments properly qualified?
* How will you explain investment options and information to scheme members and how will you make it easy to understand?
* What costs and charges will you deduct for managing the scheme?
* How will you present information about costs and charges?
* How often do you check the accuracy of your records?
* Who is responsible for monitoring the performance of investments and what is the procedure if issues are discovered?
* What is your complaints procedure?

For more information on automatic enrolment, visit: http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx