What to look for in a pension scheme

You should look at different schemes to find one that is suitable for you and your staff. There are a number of key things you should check before you decide which pension scheme to use for your staff:

Check if you can use the pension scheme for automatic enrolment and if it will accept all staff you need to put into a scheme.

Can you use the pension scheme for automatic enrolment?

The pension scheme you use for automatic enrolment must meet certain rules, for example it mustn't require staff to do anything to join the scheme or to choose their own investments.

Some schemes may only accept employers with a minimum number of staff or who have staff that earn a certain amount. Check if you can use the scheme for all your staff.

The type of scheme most likely to be available to you is one run by a large, specialist provider that is designed for many different employers to use. These generally cost less and require employers to do less, compared to other schemes.

Check if the scheme is either regulated by the Financial Conduct Authority or has been independently reviewed to help the provider show that they meet a good standard of administration (known as 'master trust assurance').

Check how much the pension scheme will cost you and your staff.

How much does the scheme cost?

Check how much the pension scheme will cost you and your staff.

You should ask the provider what charges you and your staff will pay.

Your costs and charges

Different providers may charge you in different ways, for example an ongoing monthly charge or a one-off up-front charge for the life of the pension scheme. Some schemes may also have an exit fee for employers who change pension schemes.

Staff costs and charges

As pension scheme members your staff will pay charges to cover the cost of managing their savings. Some schemes may have different charges for different members. For example, some schemes may have lower charges for your low paid staff, which may mean that these staff pay less for their pension, whichever type of tax relief the scheme uses.

It’s important that you weigh up the costs and charges against the level of services that the scheme will provide. Some services may make automatic enrolment easier for you over the long term.

Which tax relief method is best for your staff?

Tax relief arrangements are a factor in choosing your pension scheme for automatic enrolment. It’s best to choose a scheme that uses a tax relief method that suits your circumstances.

There are two ways that staff can get tax relief on what they pay into their pension (however, some providers use different names):

• Relief at source: You can tell if it's relief at source if the pension provider has to claim the tax relief from HMRC.
• Net pay arrangements: If you need to calculate tax on the pay that is left after they have paid into the pension, then the scheme uses net pay arrangements.

A scheme can only use one method for all your staff and this will affect your lower or higher paid staff in different ways. Both methods of tax relief have their benefits, and we don’t recommend one above the other, but it’s a good idea for you to check that the method the scheme uses is best for you.

Staff who don't pay income tax

If you have staff who don't pay income tax they will only get tax relief if you choose a scheme that uses relief at source. If you choose a scheme that uses net pay arrangements, these staff will not get tax relief and will pay 20% more for their pension.

Some schemes that use net pay arrangement may have lower member charges for your staff so you will need to consider this carefully.

If you use salary sacrifice to manage pension contributions, staff who don’t pay income tax won’t get tax relief whichever tax relief method your scheme uses.

Staff who pay tax

If your staff pay income tax they will get tax relief whichever scheme you choose. However, if you have higher and additional rate taxpayers and your scheme uses relief at source, they will need to claim their full tax relief by completing a tax self-assessment.

You can find income tax rate information on GOV.UK.

Which schemes use each tax relief method*

Relief at source	Net pay arrangements
National Employment Savings Trust (NEST)	Creative Pension Trust
The People’s Pension1	NOW: Pensions
True Potential Investments	Smart Pension Master Trust
Standard Life Workplace Pension2	The Lewis Workplace Pension Trust
Penfold Auto Enrolment Workplace Pension Scheme
Collegia Pension

¹ Relief at source is the default, but some employers may have chosen to use NPA instead.

² Large employers may be using the trust based scheme, which uses NPA (the GPP uses RAS).

You can find information about other schemes for automatic enrolment on the following website:

Pensions and Lifetime Savings Association (PLSA) Pension Quality Mark website

Check what extra services the scheme offers (such as writing to your staff) and whether it will work with your payroll software.

What else do you need to consider?

Pension schemes may offer you extra services, such as working out who needs to be put into a pension scheme, processing requests to join the scheme or helping with your ongoing duties. You should consider whether you need these services.

You should also consider:

Payroll software

If you use payroll software you should ask the payroll provider whether it’ll work with the pension scheme you’d like to use. You should also check that the software can carry out all the automatic enrolment tasks. Find out more and check your payroll process is set up for automatic enrolment.

Writing to your staff

You have to write to your staff individually to explain how automatic enrolment applies to them, including how tax relief works. Some pension schemes may offer to do this for you. If the scheme doesn’t do this, we have letter templates which you can use. Or your payroll provider may offer this service.

If English isn't the first language of all your staff, you may want to check whether the scheme can provide communications in other languages.

Communications from the scheme provider

It’s important that the scheme you choose regularly sends communications to you and your staff.

Check that the scheme's communications clearly explain:

• how much money a member of staff has saved
• how their money is being invested and how the investments have performed
• what their projected savings will be when they retire
• how much of the money they pay into their pension will be taken in charges
• whether they can achieve the retirement they want at the current rate of saving
• whether they qualify for tax relief on what they pay into the scheme and if they have to do anything to claim it

Investment options

Any scheme that you use for automatic enrolment must have a 'default investment arrangement'. This is what your staff's money will be put into, unless they choose their own investments. Charges paid out of member savings in default investment arrangements must be no higher than 0.75% a year of the member's fund.

You may also need to consider whether the scheme offers investment options that suit the particular needs of your staff, such as ethical funds or funds that comply with Sharia law.

Find a pension scheme

You can find a pension scheme in a number of ways. Go to choose a pension scheme.

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* Please note that there are many other pension schemes available that aren't listed on this website. There may also be other ways for schemes to demonstrate to employers that their scheme is well run. We take no responsibility for checking that schemes' claims are accurate.

We cannot recommend or endorse any particular pension scheme or any organisation. Inclusion of a scheme or mention of any organisation on this website does not guarantee their suitability. These web pages are provided for information and guidance only.