As an employer, you have a duty to offer a workplace pension scheme. This article will provide practical advice for choosing a pension scheme.
The Pensions Regulator has provided a list of schemes that are currently open for new employers to join.
In your search for a pension scheme, you should consider:
The cost of running the scheme.
The method of tax relief.
Support offered by your pension scheme provider.
We'll explain the first two considerations.
The cost of running a scheme
Each pension provider has different ways to charge for their services. The following three pension providers are used as examples, but PayFit doesn't recommend any particular pension provider.
Charge | NEST | The People's Pension | Smart Pension |
Annual management charge on employee's fund | 0.3% | 0.5% | 0.75% |
Contribution charge on new contributions | 1.8% | None | None |
Set-up or employer fee | None | Up to £500 | None |
Tax relief arrangements
Each pension provider offers different pension schemes with one of three types of tax relief arrangements. Employers can choose their scheme and, therefore, the method of tax relief. The three types are:
Salary sacrifice
Net pay arrangement
Relief at source
These impact the contributions of both the employee and the employer. For information about the three tax relief arrangements, please refer to our Help Centre article.