Choose a pension scheme for automatic enrolment
If your client has staff to automatically enrol they will need a pension scheme. 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.
Authorisation to provide advice to an employer
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 in choosing a scheme
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 MoneyHelper retirement adviser directory, which contains advisers who can help employers choose a pension scheme for automatic enrolment
Help a client with tax relief
Some schemes that use net pay arrangement may have lower member charges for your staff and if you choose a scheme that uses net pay arrangements, HMRC will pay top up payments directly to your staff that are not taxpayers. Top up payments are made annually.
However, 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.
So you’ll need to consider all this carefully when you choose a pension scheme to set up for automatic enrolment.
These HMRC top up payments will start to be made from April 2025 in respect of pension contributions made in tax year 24/25. You won’t need to do anything in the meantime and payments won’t start until 2026.
Advanced guidance
This resource may help if you have more detailed questions on the above:
- Detailed guidance 4: Pension schemes
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.