It is an employer’s responsibility to choose a qualifying auto enrolment pension scheme.
Recent TPR guidance can be found at http://www.thepensionsregulator.gov.uk/docs/employer-select-pension-automatic-enrolment.pdf.
TPR’s guidance now concentrates on the more practical aspects affecting the employer such as:
- whether the scheme can be used for automatic enrolment and will accept all staff you need to put into a scheme. This is a must.
- how much the pension scheme you choose will cost you and your staff. Charges are important, particularly now that The Peoples Pension and NOW:Pensions have announced that they will be charging employers either one off or annual fees of in or around £500.
- if you use payroll software, whether the scheme will work with it. View schemes compatible with BrightPay
- whether the scheme will write to your staff on your behalf to tell them about automatic enrolment
- whether the scheme will work out which of your staff must be put into a pension scheme – if not, ask your payroll software provider if they can do this (BrightPay can)
- your staff’s annual earnings and how they get tax relief on their contributions. There are two ways that your staff may get tax relief on their contributions. One way may be more appropriate for staff who don’t earn enough to pay tax, whereas the other way might be better suited to higher rate tax payers. Ask your provider for more information on how tax relief works with their scheme.
Other practical deciding factors are:
- Does the scheme support the use of postponement?
- Does the scheme allow ‘salary sacrifice’?
It is also good business practice for employers to consider what features are important for their workers, for example:
- Can employees make top ups?
- Online member services - Employee access to their contribution history and fund value on-line
- Choice of funds other than the default strategy (e.g. Sharia, ethical)
- Options at retirement and/or from age 55 (e.g. drawdown options)
- Member communications (are they available in multiple languages?)
- Whether they provide ‘one pot per member’ and rules on transfers.