Workplace Pensions

We help employers go above and beyond the basics when it comes to workplace pensions. Aside from an employers’ legal duties, we can help enhance sustainable and responsible fund options whilst optimising tax efficiency.

Three main types of workplace pensions:

1) Occupational pensions

These schemes can be either defined benefit or defined contribution. Defined benefit schemes are based on an employee’s salary and how long they’ve worked for the employer. Defined contribution schemes are based on employees building an individual pension pot of money from contributions paid in, plus investment returns and tax relief. The main characteristic of these types of workplace pension is they are set up by the employer under trust. The trust will then have appointed trustees and along with employer have legal obligations regards the running of the scheme. The administration of the pension will usually be carried out by a pension provider.

The employer takes on a lot of responsibility and effectively acts as the owner for the pension scheme. The employer decides on the rules of the scheme and how it will be run. Trustees are appointed by the employer. The Trustees have the power, as set out in the trust deed and rules, to ensure the scheme is run effectively and in every members’ interest.

Trustees are responsible for how members’ pension contributions are invested. Depending on the scheme rules, members may have an option on how the monies are invested.

Ultimately for members, their relationship is with the employer and trustees, not the pension provider.

For an occupational pension scheme to be used for automatic enrolment purposes, the scheme rules must allow the workplace pensions rules, as set out by The Pensions Regulator, in order to be a ’qualifying’ scheme. 

2) Group personal pensions, group self-invested personal pensions & stakeholder pensions

Unlike occupational pensions, group personal pensions, group self-invested personal pensions and stakeholder pensions work on the basis of direct contracts with its members. Members’ relationships are direct with the pension provider, not their employer.

These types of pensions are all defined contribution contracts.

The most common pension for many will be a group personal pension. They are the most straightforward, flexible and have a focussed selection of funds.

There is a rise in interest for group self-invested personal pensions which enjoy far more freedom to invest monies in different types of investments. They are often situated on a provider’s ‘platform’ and may have the option to run an ISA and general investment account alongside, expanding the savings options for employees.

With regards to automatic enrolment, most defined contribution pension schemes will be able to become a qualifying workplace pension scheme. 

3) Master trusts

A master trust is a multi-employer occupational pension scheme in which each participating employer has its own section. The most well-known master trust is the National Employment Savings Trust (NEST). Nest Corporation, the trustee that runs the NEST scheme, is a public corporation. It’s accountable to parliament through the Department for Work and Pensions but is generally independent of government in its day-to-day decisions.

Why use Francis Clark Financial Planning?

Our independent financial planning advisers can provide both businesses and provide individuals with relevant, clear financial advice to reach their goals. Our chartered financial advisors can work to advise you on numerous aspects of your business alongside workplace pensions, including business protection and employee benefits.

How to choose a workplace pension scheme

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Workplace Pensions FAQs

  • Which workplace pension is the best?

    There is no obvious answer to this question. It depends on company structure, budget, strategy, processes and desire to offer a quality pension scheme. 

    When considering a workplace pension, the most important aspect is the experience for employees. Consider areas such as retirement options, default funds and alternatives, customer service and communication language. Refer to our section ‘How to choose the best workplace pension scheme’ for more information.

  • What are my businesses legal duties?

    Every employer must provide a workplace pension to its employees. In addition to this, there are further legal duties:

    • Monitor the ages and earnings of your employees. This is to identify whether employees within a certain criteria should be enrolled into the pension scheme. From the day the meet the eligible worker status, you have six weeks to enrol them into the pension scheme and communicate with them. You must enrol employees into the pension who are
      • Aged between 22 and up to state pension age; and
      • Earn over £10,000 per year, or £833 per month or £192 per week
    • Manage requests from employees who wish to join or leave the pension scheme. Anyone who is not eligible to be automatically enrolled into the pension scheme can ask to join. The employer has a legal obligation to adhere to the request. Likewise, employees can choose to leave the pension scheme. If an employee requests to leave the pension within one month of being enrolled, all contributions must be returned, this is known as opting out
    • Employers must keep records for a specified length of time which include:
      • Pension scheme reference or registry number, six years
      • Records to show when money was paid in, six years
      • Requests to join or leave the pension, six years for joiners and four years for leavers
      • Names and addresses of those put into the pension scheme, six years
    • Declare compliance to The Pensions Regulator when the pension scheme is first set up. This must be completed within 5 months of an Employer’s duties start date
    • Every three years employers must go through the process of re-enrolment. This means re-enrolling those who have left the pension scheme who meet the criteria. Employers will need to re-declare their compliance to The Pensions Regulator

    Not complying with legal duties could mean The Pensions Regulator takes enforcement action in the form of a statutory notice, fine or prosecution with the maximum punishment of two years in court.

  • Can I change my pension scheme?

    Thorough ongoing reviews of your pension scheme are necessary to make sure you remain on track and the all duties are complied with. Regular reviews represent an opportunity to compare other pension providers. It may be that a company has grown and is now able to update their pension offering or a company has been with a particular provider for a number of years who are now out of date. Regardless of the reason, employers always have the option to change their pension scheme. The work to move pension provider should not be underestimated. Financial advice is a necessity to make sure all matters are considered, and employees communicated and consulted with in the right way.

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