Pensions insight
Image 1-Choosing a scheme
run by a board of trustees and ‘group personal pensions’ that are run by financial service companies, for example, insurance companies and investment managers. The Pensions Regulator has a list of schemes on its website which have said that they are open to all employers and which either have had their pension schemes independently reviewed or are regulated by the FCA. ● Tax treatment – You should be aware that different schemes apply different tax relief arrangement – either relief at source or net pay arrangement. If your client has staff who don’t pay income tax, it’s important to check that the scheme uses ‘relief at source’ as they would still get tax relief from the government. However, some schemes using other tax relief methods may have lower member charges. So your client should consider carefully what is right for their staff. More information about tax relief in pension schemes can be found here: www.tpr.gov.uk/scheme. ● Investment options – Any scheme used for automatic enrolment must have a ‘default investment arrangement’. This is where contributions will be placed, as staff cannot choose their own investments when automatically enrolled (but they can make a choice after). 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 client, such as ethical funds or funds that comply with Sharia law. ● Compatibility with payroll software – While payroll software can’t choose a scheme on your client’s behalf, it’s important to know that some may be more compatible with certain pension schemes than others. Payroll software can also help with other automatic enrolment tasks; for example, it is likely to be able to help identify who must be put into a pension scheme. Payroll software can also help calculate contributions and manage ongoing duties. (See Image 2 – Work together.) ● Additional services – 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. Your client will need to write to staff
Image 2-Work together
lower charges for low paid staff, which may mean that these staff pay less for their pension, even if the scheme uses net pay arrangements for tax relief. 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. The Pensions Regulator recommends employers have a pension scheme in place six months before their staging date. Taking the time beforehand to research and compare different costs and service levels will help ensure your client chooses a scheme that is right for them and for their staff. n Useful links ● C hoosing a pension scheme for clients: http://bit.ly/1Wrmkk0 ● Your role in helping clients choose a scheme: http://bit.ly/2elUxUe ● What to consider when choosing a scheme: http://bit.ly/2eNeQsi ● Find a new pension scheme for clients: http://bit.ly/2fA8HhN
individually to explain how automatic enrolment applies to them, including how tax relief works. Some pension schemes may offer to do this on their behalf. If the scheme doesn’t do this, The Pensions Regulator has letter templates which you/ your clients can use. Payroll software may also offer this service. If English isn’t the first language of all your client’s staff, you may also want to check whether the scheme can provide communications in other languages. Cost of setting up a pension scheme You should ask the scheme provider what charges your client and their staff will pay. Different providers charge 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. 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
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Issue 26 | December 2016/January 2017
| Professional in Payroll, Pensions and Reward |
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