Finding a new scheme
Your client will need to find a scheme that is suitable for them and their staff. Issues to consider include cost, whether it works with their payroll and tax implications for staff.
It’s advisable that your client allows plenty of time to make their choice. They may ask you to help them. Find more information on what to consider when choosing a scheme.
There are a number of different types of pension schemes available and different types of providers offering these schemes. The type of scheme most likely to be available to your client is a scheme run by a large, specialist provider that is designed to be used by many different employers. For information on ways to find a pension scheme, go to find a new scheme for your client.
You can provide investment advice to employers choosing a pension scheme, but you need to be authorised to provide advice to individuals. If you are concerned about what level of support and guidance you can give, go to your role in helping a client to choose a scheme or watch the short animation.
Checking an existing scheme
If a client wants to use an existing pension scheme for automatic enrolment it will need to meet certain criteria. This could involve changing the scheme rules or terms and conditions.
Check with those running your client’s pension scheme to see whether they can use it for automatic enrolment. Alternatively, for more information about the criteria that schemes need to meet, go to what to consider when choosing a scheme. If your client can't use their scheme, they'll need to choose a new one that meets the requirements for automatic enrolment.
What letters are sent to my clients from TPR?
The Pensions Regulator (TPR) sends out letters and emails to employers to support them with their automatic enrolment duties. These letters form a series of communications which are sent to your clients during the automatic enrolment process, helping them to understand their duties and guiding them through what to do next.
You may find it useful to familiarise yourself with these, to help your clients understand what do to and by when.
This resource may help if you have more detailed questions on the above:
- Detailed guidance 4: Pension schemes (PDF, 341kb, 38 pages)
There are minimum requirements for schemes to qualify and to be used for automatic enrolment, and details on certification and use of schemes based outside the UK.
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- You can provide investment advice to employers choosing a pension scheme, but you need to be authorised to provide advice to individuals.
- You could support an employer by providing factual information, helping them to compare schemes, making a recommendation or referring them to another adviser.
- Ultimately, it’s the employer’s legal responsibility to choose a pension scheme.
Authorisation to provide advice
You can provide investment advice to an employer choosing a pension scheme for automatic enrolment. However, you should only provide investment advice to an individual if you have the appropriate authorisation from the Financial Conduct Authority.
It may not always be clear whether an employer is seeking advice as an employer or an individual, eg if your client is thinking about joining the scheme themselves. You may want to specify in your letter of engagement that any advice you provide to a client is provided in their capacity as an employer – and not as an individual.
If you belong to a professional body they will have a set of ethical standards that you should refer to, which may include that you have sufficient knowledge and experience to offer automatic enrolment services. You should also check to make sure that any automatic enrolment work that you carry out is covered by your professional indemnity insurance.
Ways to support clients
The ultimate responsibility for choosing a scheme lies with the employer. However, you can support a client with this task in a number of ways:
- provide factual information, eg you could identify the pension schemes available and provide a comparison of the schemes’ investment funds, charges and services
- recommend a specific pension scheme for automatic enrolment – for more information, go to find a new pension scheme for clients
- refer your client to another adviser – you can use websites such as the Money Advice Service retirement adviser directory, which contains advisers who can help employers choose a pension scheme for automatic enrolment
If you recommend a specific pension scheme, there are a number of issues that you may wish to consider with your client. Go to what to consider when choosing a scheme.
Automatic enrolment solutions
If you offer a solution that links to one or more specific pension schemes (eg the payroll software is set up to link best with a specific scheme), you should make your client aware that there may be other pension schemes available that could be more appropriate for their staff. If you don’t do this, there’s a risk that you could be seen to be restricting an employer’s ability to actively choose their own pension scheme.
Write to your client’s staff
If you have agreed as part of your services to write to your client’s staff about automatic enrolment and their rights, you need to make sure you don’t inadvertently provide investment advice. We’ve developed letter templates to help you with this task.
Help a client with tax relief
You may need to help an employer with how tax relief is applied to staff pension contributions.
Many pension schemes only support one tax relief method, so you should understand which system they use.
When you help a client to choose a pension scheme for automatic enrolment you should check it meets certain rules. You should also consider issues such as cost, whether it works with your client's payroll and what tax relief method it uses.
Your client may ask you to help them check whether they can use their existing scheme or to help them find a new scheme.
- Check that a scheme meets the automatic enrolment requirements and will accept all your client’s staff.
- Consider issues such as whether it works with your client’s payroll software, what additional help they need, the investment options offered and the charges to pay.
- Help your client to choose a new scheme if they can’t use their existing scheme for automatic enrolment.
Can your client use the scheme?
The scheme that your client uses for automatic enrolment must meet certain requirements, eg it doesn’t require staff to do anything to join the scheme or to choose their own investments. Other requirements include the scheme:
- being tax registered in the UK
- being an occupational or personal pension scheme
- requiring a minimum level of contributions to be paid into the scheme – this depends on the type of scheme
For more information on the minimum requirements for schemes to qualify and to be used for automatic enrolment, see Detailed guidance 4: Pension schemes (PDF, 352kb, 38 pages).
Some schemes may only accept employers with a minimum number of staff or who have staff that earn a certain amount. Check if your client can use the scheme for all their staff.
Costs and charges
You should ask the provider what charges your client and their staff will pay.
Your costs and charges
Different providers may charge your client 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
Pension scheme members 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 low paid staff, which may mean that these staff pay less for their pension, whichever type of tax relief the scheme uses.
You may want to help your client weigh up the costs and charges against the level of services that the scheme will provide. Some services may make automatic enrolment easier for your client over the long term.
There are two ways that your client’s staff can get tax relief from the government on what they pay into their pension scheme.
These are commonly known as 'relief at source' and 'net pay arrangements', although some providers use different names. If the scheme uses relief at source the scheme provider will claim the tax relief from HM Revenue & Customs. If the scheme uses net pay arrangements the employer will need to calculate tax on the pay that is left after they’ve paid into the pension.
A scheme can only use one method for your client and this will affect their lower and higher paid staff in different ways.
Staff who don't pay income tax
If your client has staff who don’t pay income tax these people will only get tax relief if their scheme uses relief at source. If your client chooses a scheme that uses net pay arrangements, these staff will need to pay 20% more for their pension.
Some schemes that use net pay arrangement may have lower member charges so your client will need to consider this carefully.
If your client uses salary sacrifice to manage pension contributions, staff who don’t pay income tax won’t get tax relief whichever method their scheme uses.
Staff who pay tax
If your client’s staff pay income tax they will get tax relief whichever scheme they use. However, if your client has higher and additional rate taxpayers and the scheme uses relief at source these people will need to complete a tax self-assessment to claim their full tax relief.
Which schemes use each tax relief method
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 at the Pensions and Lifetime Savings Association (PLSA) Pension Quality Mark website.
If your client uses payroll software they should ask the payroll provider whether it'll work with the pension scheme they'd like to use.
Your client also needs to check that the software can carry out all the automatic enrolment tasks. For more information, go to check the payroll process.
Letters for staff
Your client has to write to their staff individually to explain how automatic enrolment applies to them, including how tax relief works. Some pension schemes may offer to do this for your client. If the scheme doesn't do this, we have letter templates which you or your client can use. Your client's payroll provider may also offer this service.
If English isn't the first language of all your client's staff, they may want to check whether the scheme can provide communications in other languages.
Information and support
Pension schemes may offer extra services such as working out who needs to be put into a pension scheme, processing requests to join the scheme or helping with ongoing duties. Discuss with your client what services they need.
It's important that the scheme your client chooses regularly sends communications to them and their staff.
Check that the scheme's communications clearly explain:
- how much money a scheme member has saved
- how their money is being invested and how the investments have performed
- what their projected savings will be at retirement
- how much of the money they pay into their pension will be taken in charges
- whether they can achieve the retirement they want at their 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
Annual statements and other communications should help your client's staff to understand how they're progressing towards funding the retirement they want.
Any scheme that your client uses for automatic enrolment must have a 'default investment arrangement' for staff who don't 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.
Check whether your client's scheme needs to offer investment options that suit the particular needs of their staff, eg ethical funds or funds that comply with Sharia law.
Downloadable summary of what to consider
There are a number of different ways that you can find a new pension scheme for a client – you could look at schemes that have been independently reviewed, the government’s scheme and schemes listed on industry websites.
- Employers are increasingly using schemes run by large, specialist providers that are designed to be used by many different employers.
- You can find pension schemes in a number of ways including schemes that have been independently reviewed, the government scheme and schemes listed on industry websites.
Types of pension scheme
The type of scheme most likely to be available to your client is a defined contribution scheme run by a large, specialist provider that is designed to be used by many different employers. These include 'master trusts' that are run by a board of trustees and 'group personal pensions' that are run by financial service companies, eg insurance companies and investment managers.
These schemes generally cost less and require less involvement from the employer compared to other schemes.
Find a pension scheme
You or your client should look at different schemes before deciding which is suitable for them and their staff.
Your client should choose an appropriate scheme that has been independently reviewed (known as 'master trust assurance') or is regulated by the Financial Conduct Authority. Of these schemes, the following have told us they are open to small employers:
- Aviva Master Trust
- Aviva Workplace Pension
- The BlueSky Pension Scheme (TBPS)
- The Creative Pension Trust
- The Lewis Workplace Pension Trust
- The People’s Pension
- Standard Life Workplace Pension
- True Potential Investments
- Workers Pension Trust
Other schemes have master trust assurance but may not be open to all employers.
Schemes listed by industry bodies
You can find lists of other schemes that may be available for automatic enrolment on the following website:
Please note that there are many other pension schemes available that aren't listed here. 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.