10 Simple Steps to Creating a Corporate Pension Plan
As of April 2018 all UK employers must have begun enrolling staff into a workplace pension by law. We are now well into the small business staging phase with duty dates for new employers now in effect.
For many new business owners, the prospect of setting out a workplace pension can seem daunting. However, it cannot be overlooked as businesses that ignore penalty notices are now facing court and serious fines, which can have knock on effects for business growth in the future.
Providing a unique company pension scheme can help retain and motivate existing staff as well as attract new staff. Investing some time and thought will help you to realise the benefits that can be gained.
Here we give our ten simple steps to setting up a pension plan that should help take the confusion out of getting started and give you a clear path to completion.
1. Find out your staging date
Before you even get started with your corporate pension plan, find out your staging date. This way you know how much time you have to plan, make decisions and communicate changes to staff, all with enough notice.
You can find out your exact staging date by heading to the Pension’s Regulator Website and entering your PAYE reference.
2. Work out who needs to be enrolled
Not every member of staff is necessarily eligible to be enrolled in a workplace pension scheme.
Employees qualify when they are aged between 22 and state pension age and earn over £10,000 in salary.
Any eligible employees that don’t want to contribute towards a workplace pension must opt out using a provider’s official opt-out form.
You may find employees that aren’t eligible might want to opt into the pension scheme, in which case employers are obliged to do so.
Working out who is eligible and how much contribution is required each month doesn’t need to be a laborious task. Most modern payroll software should show you who is eligible and calculate contributions automatically. This is also a great help if you have any staff on flexible contracts, as this can be tricky!
3. Plan for newly eligible employees
After you have assessed your staff in their current employment status you will then need a plan of action for any new eligible people that may join your team in the future, as well as existing staff that reach the eligible age or earn over the required salary. From now onwards, any member of staff that becomes eligible, or is eligible upon joining your company must be enrolled immediately into your workplace pension.
4. Find a pension provider that works for you
Many of the most popular pension providers for small businesses offer hassle-free, online setup systems. The government’s workplace pension, known as NEST, is free for employers, and Standard Life and Aviva both have schemes that take less than ten minutes to set up online.
The tricky part is weighing up which provider will work best for your business, as there is a vast choice of providers out there, each with varying options. This is why it is important to ask for advice from an independent financial advisor. We always consider each client separately and find the right solution that is bespoke to your needs.
5. How much will you contribute?
At this stage you need to consider how much income you want your corporate pension scheme to deliver for your employees. You are only obliged to pay the minimum, which is 1%, and this will increase over time. You can however choose to pay more than the minimum required. Paying more means you are offering a much more attractive workplace pension for your staff and this positions your company as a desirable employer. We can help you balance the pros and cons of doing this for your business.
6. Check out the competition
If you are interested in using your pension scheme as competitive leverage for recruitment, then you need to do some research. Have a look into your competitors and find out what they are offering for their workplace pensions. We also share best practice pension stories with our clients, by looking at companies that you admire, that are not direct competitors but have a desirable reputation.
With all UK employers now offering pension schemes by law, it is important that you offer a pension that not only competes in your playing field, but also keeps your employees happy.
7. Communicate changes to your employees
You must communicate the upcoming changes to wages and the benefits of the pension scheme to all of your staff. This must officially be done in writing, but it is also important to get your team on board and hear any questions they may have.
Just like any other major change in business there is always a much smoother transition when information is offered freely and people feel involved by having their voice heard from the start. We always recommend holding workshop-style meetings where people can discover all the details of their pension scheme, understand their rights and how it will positively impact their lives.
This process is a fantastic opportunity for managing expectations, building staff morale and making employees feel appreciated. At Laurus we regularly manage the staff communication stage on behalf of our clients, as we are very experienced in the type of questions people ask. A client we recently managed the entire pension set up process for saw 100% take up as a result of carefully planned staff communications.
8. Complete a declaration of compliance
This is a detailed administrative job that takes preparation with a two-page-long checklist. You can save time by completing it as you go through the process, or you can simply outsource it to us.
The declaration of compliance must be completed five months from the start date of your duties.
9. Start paying into the scheme!
Now your workplace pension is all set up you can start paying in. As previously mentioned your payroll software should calculate each employee’s contribution and your contribution automatically.
10. Review your scheme regularly
Always monitor your pension with a regular review. This just makes good business sense, as you can evaluate funds and ensure your pension is always giving good returns. We meet with our clients regularly to update them on how their pension scheme is working and advise on any updates we think could be beneficial in line with new legislation or tax regulations.
If you already have your pension set up but it is not meeting your requirements, you can always renew it by getting in touch and we can assess what would be the best pension option for you.
Outsource the Pension Setup Process
Hopefully our ten simple steps have given you a few ideas on what to do with your workplace pension, but remember, this is even easier if you have a trusted financial advisor to manage the entire process for you. Get in touch and let us manage the research, admin work and internal communications of setting up a workplace pension. This will be much more time-efficient and cost-effective – and you can get on with running your business.
Speak to one of our directors Karen Barwick or Colin Dawson on:
0191 281 1234