How to set up a workplace pension in the UK – an employer’s guide

Providing a workplace pension scheme (also known as an occupational pension scheme) is a legal obligation for all employers. Our wealth management experts walk you through the process of setting up a workplace pension scheme and give advice on how to choose the right scheme for your company.

Under the Pensions Act 2008, all employers must enrol eligible staff into a qualifying workplace pension scheme and contribute to it. Staff are eligible if:

Your legal obligation as an employer comes into effect from the first day of the employee’s employment. Failure to meet with your auto-enrolment duties can result in significant fines.

Benefits of providing a workplace pension scheme

Workplace pensions have gained a negative reputation among many employers due to the legal obligation and repercussions for non-compliance associated with them, but there are several benefits for employers that commit extra time, effort and funds to creating an attractive pension scheme.

  • Talent acquisition – A strong workplace pension will enhance your overall benefits package and could attract new staff to your company. This is especially beneficial if you operate in a competitive job market.
  • Staff retention – Just as a good benefits package supports recruitment efforts, it can also support you in retaining and engaging your existing staff.
  • Enhanced company reputation – Companies that show they are looking after their employees (for example, by providing a good benefits package) are more likely to be viewed favourably by current and potential customers.

How do I set up a workplace pension in the UK?

Setting up a workplace pension can be summarised in four key stages:

  1. Find a qualifying workplace pension scheme provider – This is potentially the most time-consuming step in the setup process. You must find a pension scheme that facilitates auto-enrolment. Support from a workplace pensions specialist can speed up the process significantly – get in touch to find out more.
  2. Identify which staff must be enrolled in the scheme and the value of contributions both parties need to pay – Whenever you hire a new member of staff, you must assess their pension scheme eligibility by considering the eligibility criteria listed at the start of this article. Your workplace pension scheme provider will have a list of information they require for each new starter in order to complete their enrolment.
  3. Notify your staff that they have been enrolled – As part of your legal obligation as an employer, you must inform staff in writing that they will be automatically enrolled into the pension scheme and explain what this means for them. This must be done within six weeks of your employee’s start date.
  4. Declare your compliance – Notify the Pensions Regulator that you have fulfilled your auto-enrolment duties. There is a useful declaration of compliance checklist to help you with this process. This must be done within five months of the scheme being established.

How to choose the right workplace pension scheme for your company

Most importantly, you must make sure that you can use your chosen pension scheme for automatic enrolment. If the scheme requires your staff to carry out an action to enrol in the scheme or asks them to choose their investments, it is not a suitable choice.

There are several other notable factors you should also consider when choosing a qualifying workplace pension scheme:

  • Whether or not the pension scheme will accept the staff you employ – some providers will only accept your company if it employs a minimum number of staff or pays wages that are above a specific threshold.
  • How much will the scheme cost both you and your staff – different companies will have different methods for charging you, e.g. a one-off charge or monthly charges. Your staff will also be subject to pension management costs from the provider.
  • Which tax relief method it uses – pension schemes can only offer one method of tax relief on pension contributions for your staff. As there are two different methods of relief (relief at source and net pay arrangements), it is essential to make sure you choose a scheme that applies the relief that is most beneficial for your workforce as a whole.
  • If the scheme is regulated by the Financial Conduct Authority (FCA) – this is evidence that the pension provider meets a set standard of administration.

Speak to a qualifying workplace pension scheme and wealth management specialist

Our wealth management specialists can help you set up a workplace pension scheme for your company that benefits both you and your employees. As chartered financial planners, we provide specialist pension scheme services, alongside a range of wealth management services for corporates. Contact us today to discuss your business needs.