Auto Enrolment Pension Scheme – Issues and Choices

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Part of the complexity surrounding making the best decision on an Auto-enrolment pension scheme revolves around the many types of pension plans available. Even if we concentrate on the most common type (defined contribution) the issues still require careful consideration.

The first step is to check if any existing defined contribution pension scheme is compliant with Auto-enrolment. If a scheme does exist and it is a qualifying scheme it could greatly simplify the process as there may not be any automatic enrolment duties for existing eligible employees, although there will be a requirement to issue them with information. It also reduces documentation requirements and simplifies system issues including payroll.

The qualifying criteria are complex but in simplified form the existing pension scheme must:

  • Have the main administration in the UK or other European Economic Area (EEA).
  • Not present any barriers to enrolment into the pension scheme.
  • Have no requirement for an employee to complete an application form or give any other form of consent.
  • Have no requirement for the employer to provide any information on the employee other than the specific information required for auto-enrolment.
  • Must provide a default fund investment option for all employees and not require employees to make a specific choice unless they wish to do so. More information on this issue at www.dwp.gov.uk
  • Be defined as an occupational or personal pension scheme.
  • Be tax registered.
  • Be subject to regulation by the Financial Conduct Authority (FCA).

To help with the decision making process the Pension Regulator has set up an example (test) scheme that may be used as a benchmark.

If an existing scheme does not comply or if there is no existing scheme in place then it will be necessary to choose an appropriate auto enrolment pension scheme. There are a wide number of factors to be considered including:

  • The type of defined contribution scheme: There are several including Nest (a workplace pension setup to facilitate automatic -enrolment as part of the government’s workplace pension reforms under the Pensions Act 2008), Master Trusts and Group Personal Pension arrangements.
  • If the scheme can be used for auto-enrolment.
  • Will the pension scheme be compatible with existing payroll software?
  • What are the pension funds default investment options?
  • What are the costs and charges?
  • What tax relief method is used by the pension provider.
  • What level of support (if any) is available from the pension provider.
  • Is the pension fund well run.

Should you wish to talk through the issues surrounding your auto -enrolment pension scheme in more detail please do not hesitate to call (no obligation) us on 0800 043 8341 or Email enquiries@thepensionreviewservice.com. Alternatively, complete the form below, add an appropriate time to the comment box and we will call you.  We are Financial Conduct Authority (FCA) authorised and regulated and operate UK wide.

The information in this article does not constitute financial or other professional advice.

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