What to Consider when Signing up to a Workplace Pension
by Mashum Mollah Finance 16 March 2017
Signing your staff up to a workplace pension can be rather daunting. There are many things that need to be considered in order to ensure that the pension plan you’re involved in is right for both the staff enrolled in it, and for the business itself. FSB Pensions talk you through some things to keep in mind during this process.
Who needs to sign up and why?
The UK Government brought the workplace pension automatic enrolment scheme into place in October 2012, and this was borne from the concern that not enough people in the workforce today are preparing for retirement effectively. To remedy that, obligatory workplace pensions were brought in to bolster the savings of workers ready for retirement.
Read also:5 ways to incentivize your team
Your staff has to meet certain criteria to be automatically enrolled. Your staff must:
- Be based in and working in the UK
- Have an annual wage of at least £10,000
- Be between 22 and state pension age.
For example, a 34-year-old part-time staff member earning £9,000 annually would not need to be auto-enrolled. You would, however, need to offer access to the workplace pension scheme to all your staff. The only difference here is that you are obligated to contribute to the funds of all staff on the scheme except those who, regardless of age, earn less than £5,668.
One aspect to consider before you sign staff up is what your staff want out of their pension fund. Make sure you choose a flexible fund that will let your staff view exactly how much is going into their pot, and choose what happens to their money. Younger staff may be happier to take risks through investments, while older staff may prefer a stable and consistent fund with no risk.
Ensuring your own preparation:
Workplace pensions work in two ways: employer contributions, and employee contributions. As of now, these contributions are set at 1% each. However, the government is gradually phasing this scheme in, and as such, contributions will scale gradually until April 2019, where the contributions will become 3% and 5% respectively.
The added benefit of a workplace pension is that the government offer tax relief on contributions – some contribution from your salary is free from tax, meaning more money injected straight into your pension fund.
Similarly, the fact that this scheme is gradually being rolled out means many businesses will already be enrolled in a workplace pension scheme. By April 2017, all currently established businesses will be enrolled, while all new employers will be enrolled by February 2018. To check your enrolment deadline – known as your staging date – use the UK Government’s calculator by using your PAYE reference.
Preparing for the future is vital for everyone in today’s business landscape, and a workplace pension is a simple solution to becoming more financially cognisant, and a great stepping stone to kick-starting the savings habits of everyone involved.