Step 2 Choose a pension scheme (or check your existing one)
You should do this approximately 6 months before your staging date as this can take some time to complete.
You’ll need to have a pension scheme that is set up for automatic enrolment. You and your staff will pay money into this scheme to help your staff save for their retirement.
Unless you want to use an existing pension scheme for automatic enrolment, you’ll need to find a scheme yourself or get help from your accountant or a financial adviser.
Schemes to consider
You should look at different schemes before you decide which is suitable for you and your staff. For example, you could look at:
- the scheme set up by government
- independently reviewed schemes
- schemes listed by industry bodies
1. The government scheme
The National Employment Savings Trust (NEST) is a pension scheme provider that has been set up by the government and must accept all employers that apply to use it for automatic enrolment.
2. Independently reviewed schemes
Some providers have had their pension schemes independently reviewed to help them show that they meet a good standard of administration. This is known as the ‘master trust assurance framework’.
You may be able to use the following schemes with master trust assurance, which have said they are open to small employers looking for a scheme provider for automatic enrolment.
When choosing a scheme, you should consider if it is suitable for your lower paid staff, in particular whether they will receive tax relief on their contributions. If the scheme operates relief at source, staff earning under £10,600 a year (or less than £11,000 from April 2016) will be able to get tax relief from the government. If the scheme runs net pay arrangements, these lower paid staff will not get tax relief and will pay more for their pension than if you use a ‘relief at source’ scheme. Higher paid staff earning over £42,385 will need to claim back their full tax relief by completing a self assessment if the scheme operates relief at source but will get their full tax relief automatically added into their pension fund if the scheme operates a net pay arrangement. More information on tax relief is available in what to look for when choosing a scheme. Make sure you check this issue properly before choosing a scheme for your staff.
Schemes using relief at source - may be suitable for both your higher and lower paid staff
Schemes using net pay arrangements may be suitable if you do not employ lower paid staff (earning under £10,600, or less than £11,000 from April 2016):
If the scheme uses net pay arrangements, then for any of your staff who earn under £10, 600 (or £11,000 from April 2016), the deductions from their pay will be 20% higher than if the scheme runs relief at source. This means that they pay 20% more for their pension. You should check that your lower paid staff are not worse off under net pay arrangements.
3. Schemes listed by industry bodies
You can find lists of schemes on the following websites:
- Association of British Insurers: ABI members providing qualifying automatic enrolment schemes
- Pensions and Lifetime Savings Association (PLSA) Pension Quality Mark website
With these schemes, make sure you also check whether the scheme is suitable for low earners.
We have more information available on what to look for in a pension scheme.
If you have an accountant, they may be able to help you find a scheme or a financial adviser that can help.
You can also use the Money Advice Service retirement adviser directory, which contains advisers who can help you choose a pension scheme for automatic enrolment.
To check if an adviser is authorised by the Financial Conduct Authority, search the FCA register.
You may already have a scheme for your staff – you might know this as a ‘stakeholder pension’. If you want to use your existing scheme, ask the provider if it meets the automatic enrolment rules.
If you can’t use it, you’ll need to choose a new scheme to meet your automatic enrolment duties.
Please note that there are many other pension schemes available that aren’t listed above. There may also be other ways for them to demonstrate to employers that their scheme is well run. The regulator takes no responsibility for checking that schemes' claims are accurate.
The regulator cannot recommend, nor does it endorse, any particular pension scheme or any organisation. Inclusion of a scheme or mention of any organisation here does not guarantee their suitability. This web page is provided for information and guidance only.
Now that you've chosen a pension scheme, you must put your staff into it. The next step will help you to do this.