If you are a small business owner with employees, it is important to choose a business pension provider (even if you already have a retirement plan for yourself). This is a legal requirement for most British businesses, but don’t worry; it doesn’t have to be a big stress. You just need to know what to look for when you are choosing a provider!
Here is everything you need to know about choosing a small business pension provider.
How To Choose A Business Pension Provider: Understanding Your Pension Obligations
If you own a small business with staff, it is likely you have legal pension obligations to fulfil. The Pensions Act 2008 states that every British employer must provide their staff with a workplace pension scheme. This applies to any staff member who is over 22 and earns a minimum of £10,000 per year.
Thankfully this is actually really simple to do, and the payments can be automatic. The most important part is finding a pension scheme that benefits both your business and your employees.
What To Look Out For
1. The FCA
It is important to find a pension scheme that is approved by the FCA (also known as the Financial Conduct Authority). This ensures that the scheme is good value for money, and it also means that the retirement savings are protected against any market crashes in most instances. Avoid any pension schemes that haven’t been acknowledged by the FCA.
2. Tax Relief
Most UK business pension schemes have one of two relief plans; either ‘net pay arrangements’ or ‘relief at source’. This is especially important for low income employees who don’t need to pay annual income tax, as they will only get tax relief through these schemes. If not, they will need to pay an extra 20% towards their pension, which can be a big issue. So make sure to find a pension provider that offers one of these tax relief plans, especially if you have a lot of low income employees (such as part-timers).
3. Costs
Different pension plans come with different prices depending on the services you choose. Some offer monthly charges instead of yearly, which is ideal for small business with a tight budget. When shopping around make sure to ask about the payment plans available, and if you have a small budget consider choosing a monthly payment plan (that doesn’t cost more for being a monthly service). This will help to save you money every year, and it means you don’t have to worry about paying a big annual bill.
4. Investment Choices
Finally it is worth looking at the investment choices that come with the pension scheme. Lots of pension schemes in the UK have an investment plan for contributions, allowing you to increase the pay outs for your employees. We suggest looking for schemes that go for low-risk investments, rather than high risk investments. It is also important to ensure that all investment opportunities are classed as ethical investments!
