Setting up a pension scheme - checklist

Jar filled with coins labelled pension

All employers are legally required to automatically enrol eligible workers into a workplace pension scheme and pay a contribution towards it.

  • The rules take immediate effect on the day your first employee starts work.
  • Nominate a point of contact. The Pensions Regulator will send you information and updates - make sure these are sent to the right person.
  • Review types of pension schemes on offer. There are two main types of pension - defined benefit (also known as 'final-salary') schemes and defined-contribution (or 'money purchase') schemes. Most small businesses choose defined-contribution schemes as they are the most economical.
  • Choose a new pension scheme that is right for your business. Research each scheme thoroughly, including charges, monthly contributions, penalties, tax relief and rebates. Remember your new pension scheme needs to comply with automatic enrolment rules.
  • Evaluate the risks of a new pension scheme. With a defined-contribution pension scheme, the risk lies with the employee. You will not have to find extra money to make up any shortfall if the scheme performs badly. But with defined-benefit salary pensions, your business is responsible for delivering the agreed sum.
  • Research off-the-shelf pension schemes such as the government NEST scheme. You don't need a new pension scheme tailor-made for you. List your requirements in order of importance and contact an independent financial adviser or The Pensions Regulator, who will advise you on what would work best for your business.
  • Inform your employees about the new pension scheme. Once you have decided on providing a pension scheme, let your employees and/or their representatives know about it. Make sure they understand the implications and benefits of joining or opting out.
  • Automatically enrol eligible workers into the pension scheme unless they actively 'opt out' or decide to cease membership (in the case of entitled workers who asked to join the pension scheme or workers enrolled into a qualifying scheme under a contractual agreement).
  • Register with the Pensions Regulator and keep accurate records.
  • Pay employees' contributions to the pension scheme. Employees must pay a minimum percentage of their qualifying earnings.
  • Make your own 'employer contributions' in line with the schedule of contributions. Your payment is based on 'qualifying earnings' and must meet the minimum required - although you can opt to pay more.
  • Re-enrol certain eligible employees every three years. For example, those who opted out of your scheme more than 12 months before your re-enrolment date.

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