All you need to know about pensions but were too afraid to ask
The co-founder and MD of Smart Pension outlines the important questions you need to ask when it comes to pensions, and how to answer them including what fees your firm might have to pay and how to check the quality of a provider’s pension.
Over the next two years 1.8m small businesses must be signed up for a workplace pension or face penalties. The staging dates for those that have just one or two employees are rapidly approaching and yet many are still unaware of their responsibilities.
Unlike large firms, small businesses don’t have vast admin departments. The brown envelope from the department of work and pensions with a distant staging date will have been filed and will undoubtedly be just another job on the long list for busy founders, which also happens to include running the company.
Yet new legislation means employers? responsibilities don’t just involve making regular financial contributions to their employees? pension pots, but the act of enrolment, ongoing education and regular reporting too.
But with some careful thought, it doesnt have to be the administrative burden many believe it to be.
So what do small business founders need to know?
New legislation means that even those that have just one or two employees must offer a workplace pension to staff that qualify.
What does qualify mean?
Well, if the employee is aged 22 or over and under state pension age, and is paid over 10, 000 a year and based in the UK, they must be offered a pension.
What is a staging date?
It is a specific date by when all staff must be enrolled. It is calculated on how many staff you employ and just means enrolment is staggered in a descending order to avoid a big crush. Companies will receive notice of theirs or can use this calculator to work it out.
Do founders have to do it all themselves?
According to the Pensions Regulator if firms are deemed eligible to provide a pension, they can nominate an adviser to deal with their application and subsequent arrangements if they wish. This could be a financial adviser or a senior member of the team.
If founders don’t educate staff or offer guidance they face a 400 fine. Smart Pension offers an employee education video generator free to anyone, regardless of whether they enrol into Smart Pension’s workplace pension.
Here arethe five important considerations for employers when researching a pensions auto enrolment scheme:
(1) Fees to your business
Avoid up front set-up fees. These vary and range between free to 1, 500 or even higher. A fee attached does not guarantee extra support or that you are signing up with a more reputable scheme. You should also avoid annual maintenance fees for employers too. This is often a fixed fee and can be anything up to 1, 500 a year for a company or a per employee fee. Look out for schemes that are free to employers to set up and run ongoing, like NEST and Smart Pension.
(2) Quality of the pension
There are a number of ways to check the quality of a provider’s pension, with Defaqto probably the best. Defaqto rates all pensions on a scale of one to five stars, five being the best. You can see Defaqto’s auto enrolment ratings here. Were proud to have five stars at Smart Pension.
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