How to Get Better Value From Your Workplace Pension Scheme

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How to Get Better Value from Your Workplace Pension Scheme

Pensions are an ideal way to build loyalty and reward your staff. However, not all pension scheme providers are the same. That’s why it can help to review your workplace pension and see if another scheme could give you and your employees better value.

Why Do You Need to Review Your Workplace Pension?

Your pension scheme can help you attract and retain the best people for your business. Whilst a workplace pension is a necessity for every employer, you’ve got the chance to make your scheme an attractive benefit. One that helps your staff plan a comfortable lifestyle in retirement. However, there are more providers to choose from today with different services and costs. Competition amongst pension providers means there are more choices about the costs for members. As charges impact how much income your staff will have in retirement, lower charges can make one pension scheme more attractive than another. Another factor is communication. Your employees should get regular updates from your provider about their pension, as well as the options available to them. If your provider is not keeping your staff informed you should review whether they are still the right choice for your pension scheme. Salary sacrifice is an extra benefit that you could offer your staff. This lets your staff swap some of their salaries in return for pension contributions. As a result, they could save money on tax and National Insurance and your company could pay lower Employers’ National Insurance. If you’re thinking about using a salary sacrifice scheme in your business, it can help to review your pension scheme provider at the same time. In short, the best way to check whether a scheme still offers good value for money for you and your staff is with a review.

When Was the Last Time Your Workplace Pension Scheme Was Reviewed?

Auto-enrolment is now a fixture of running a business. However, there are going to be more changes to it in the future. The government has plans to increase the “qualifying earnings” to an employee’s full salary. At the time of writing, the qualifying earnings are any pre-tax employment income between £6,240 and £50,270 (in 2023/24). However, the changes would remove the lower earnings limit (currently £6,240) by the mid-2020s. As a result, if you’ve not reviewed your workplace pension scheme since you started auto-enrolment, now is a suitable time to check if it’s still the most suitable option for your business.

The Benefits of a Workplace Pension Review

A workplace pension review with an independent financial adviser will give you an external professional view about your current provider. Your advisor can also find out what other options are available to you from different providers. This lets you compare the different services and how much these would cost your employees. An external benchmark of your pension scheme can help you improve your confidence in how it’s run. Or if it doesn’t meet your expectations, you’ll receive recommendations about alternative providers.

What Happens with a Workplace Pension Review

An external review will look at a range of factors about your pension provider and then give you a report with a set of recommendations. The review will investigate your current provider and check:

How Much Does the Scheme Costs You and Your Staff?

Scheme costs can include an ongoing monthly charge or a one-off upfront charge. Some providers also charge an exit fee to employers if you choose to switch providers. For example, Nest pensions currently charge 1.8% on every new contribution to a member’s pot. There’s also currently an annual management charge (AMC) of 0.3% on the total value of a member’s pension fund every year.

Does the Scheme Provide the Best Tax Relief Method for Your Staff?

Workplace pension schemes can use alternative methods for calculating tax relief. This is either done by relief at source, where the provider has to claim tax from HMRC. Or net pay where the employer has to calculate tax on pay after paying into pensions. The option that’s best for your staff depends on how much income tax they pay.

How Well Does Your Pension Provider Work with Your Payroll Software?

The ease or difficulty of working with a workplace pension scheme provider impacts your business. If you experience problems integrating with your provider through your payroll software this can be another sign that they are not the ideal provider for your business.

Does Your Provider Send Regular Communications to Your Staff?

Communications with your staff is a central part of a scheme provider’s role. A lack of regular and helpful communication makes the scheme harder to use for your staff. During a review, the frequency and content of these communications can be checked by your advisor.

What Range of Investment Options Does Your Pension Provider Have?

A pension provider with a limited range of investment options is restricting choice for your employees. As the value of investment options impacts the size of their future pension, offering a range of funds across different types of assets is important.

How to Change Your Workplace Pension Provider

A workplace pension review will help you weigh up the costs of the scheme against the level of service you and your employees receive. If you decide to change your workplace pension provider, your external review can carry out research about the different pension scheme and their providers. This independent advice from a pension specialist can help you make a decision on which provider to choose if you decide to switch.

Help Your Employees and Help Your Business 

Our team of retirement experts are here to help you review your workplace pension scheme and research alternative pension scheme providers. Give us a call on 0345 224 3175 to book an appointment.

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