How to choose the right pension scheme for your business
Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.
What types of pensions are available?
There are two common types of pension scheme:
Defined contribution pension schemes
This is the most common type of pension scheme and works by taking a contribution from you and your employee and invests it.
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 pension scheme is built up using contributions from you and your employee. The amount they receive at retirement is based on how long they have worked for you and how much they earn when they retire (final salary pension) or an average of what they earned during their career (career average pension).
These 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 if your provider will accept any new employees onto the scheme and whether they are set up for auto enrolment.
If you have an existing defined contribution pension scheme: you will need to automatically enrol your eligible employees before your staging date.
If you have an existing defined benefit pension scheme: which still accepts new employees, you have the option of deferring your staging date until October 2017.
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 Trust
The Pensions Trust
National Pension Trust
Legal & General Worksave Mastertrust
Welfare Pensions
Railways Pensions Scheme Industry Wide Defined Contribution Section
The Ensign Retirement Plan
Bluesky Pension Scheme
Lifesight
The 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 charge 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, a task usually given 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 amount 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 ready for your staging date.
Here is where you can find out how to set up your workplace pension.
You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.