How to choose the right pension scheme for your business

What types of pensions are available?

There are two common types of pension schemes:

Defined contribution pension schemes

This is the most common type of occupational pension scheme and relies on contributions from the employer and the employee, with the employee’s share being taken from their wages. The money is invested by the pension provider, meaning the value could go up or down; the more that is paid in, however, the more the employee could get back at retirement.

The level of risk your employees take with their pension fund is their own choice, unless there is a scheme manager in place for the pension.

Defined contribution pension schemes are usually accepted for auto enrolment.

Defined benefit pension schemes

This type of pension scheme is also built up using contributions from the employer and employee. However, the amount employees receive at retirement is based on how long they worked for you and what their salary was when they retired (final salary pension) or an average of what they earned during their career (career average pension).

Defined benefit schemes are unlikely to accept any new employees for auto enrolment.

Which pension do you need?

If you already have a workplace pension

Check to see that the scheme has been set up for auto enrolment. Remember that you need to monitor the age and earnings of all non-eligible employees to see if any have become eligible for auto enrolment.

If you have an existing defined contribution pension scheme

You will need to automatically enrol your eligible employees onto your scheme

If you have an existing defined benefit pension scheme

If the scheme still accepts new employees, you will need to automatically enrol your eligible employees onto your scheme

If your existing pension does not accept new employee's contributions

You will need to find a new pension scheme for anyone who does not currently pay into your existing one.

If you need a new workplace pension

Here are some of the pension schemes which accept auto enrolment requests:

• National Employment Savings Trust (NEST)

• The People's Pension

• Now: Pensions

• tpt (The Pensions Trust)

• National Pension Trust

• Legal & General Worksave Pension Mastertrust

• Railways Pensions Scheme

• Ensign

• Bluesky Section of Crystal

• Lifesight

• Atlas Master Trust

Visit the Pensions Quality Mark website for more information on these pension schemes or speak to an independent financial advisor to discuss your options.

Top four questions to ask a pension provider

• What are the fees and charges? Pension providers take their charges from contributions and the overall pension pot each year.

For example; NEST charges an annual management fee of 0.3% on each pension pot in addition to a 1.8% charge on each payment into the pension.

• Who manages the pension? Find out if a scheme manager or your employees will be responsible for managing the pension.

For example, some pension providers let individuals choose how they invest their contributions, rather than giving the task to a scheme manager.

• Where is the money invested? Find out how the pension contributions are invested.

For example, will the money be invested in shares, cash, property etc?

• How many people can you add? Check to see if there is a minimum or maximum limit to the number of employees you can enrol.

Need help choosing the right workplace pension?

An independent financial advisor can advise you on your options for a workplace pension.

What is next?

Once you have assessed your workforce and decided which scheme you want for your workplace pension it is time to set up the pension.