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The AE Fast-Track Blog


Our latest Blogs about Auto-Enrolment

Workplace pension schemes... how to choose

It’s fair to say that the most important decision you’ll make around auto-enrolment is the choice of pension scheme for your employees.  Selecting the right provider at the outset can potentially save you and your employees many thousands of pounds over the lifetime of the scheme.  So how do you go about choosing the right scheme for your business?   


The government imposed a cap on charges for workplace pension schemes of 0.75% to make sure they offered good value for money - this is called the Annual Management Charge (AMC) and it’s a charge against your employees’ funds each year.  Many providers have set their AMC at the top of the cap, but if you shop around you’ll find quite a few ranging from 0.5% up to the cap.


It can be quite tricky for a normal person (i.e. a non-pensions geek) to find out what a pension scheme’s charges are, because they’re not always clearly evident on the provider’s website.  And the AMC isn’t the only charge to think about.  Some schemes charge a monthly fee to the employer to use their scheme, which can be as much as £100 a month; others charge the employer a set-up fee, which is payable over and above any advice you may receive from your advisor.  It’s well worth doing the research to find out what’s best for your business, or appointing an experienced advisor who can find out for you.


But it’s not all about charges – you need to know that the provider is well-established and their business is well governed.  You want to make sure your employees’ pensions are in safe hands.  You should expect a broad investment selection and good, steady history of performance.  Customer service and payroll integration are also important factors in saving time and costs going forwards.


Understand what you’re signing up to – is it a master trust or a commercial provider?  Many master trusts are not-for-profit organisations and all are set up as occupational pension schemes, governed by Trustees who must act in the best interests of their members.  Commercial providers are for-profit and are set up as personal pension schemes.  Your advisor will be able to explain the pros and cons of each, but it’s important that you understand what type of scheme you’re signing up to.


So the message is clear: don’t just go for an easy ‘default’ option - it’s really worthwhile spending a  bit of time at the outset to choose your scheme carefully.  If you think you might need to set up a scheme, or would like to talk through your circumstances, please give our friendly and experienced team a call on 0800 160 1233.  We’ve got lots of useful information and guidance on our website if you need it:

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