Setting up a company pension scheme
Which scheme should you offer and how much should you contribute?
Before setting up a pension scheme to use for your business, you need to weigh up the differences between the options available to you as an employer.
It is important that you consider the following issues:
- The level of funding you are prepared to give as an employer
- How much income you want your pension to deliver to your employees
- How much you will have to consult with employees regarding changes to the scheme you offer
- Whether you want to be able to change your pension scheme easily
- What areas (if any) you would like your pension to scheme to invest in (or areas you'd like to avoid)
- The costs, charges and penalties involved in the scheme
- The reputation of the pension provider
- What happens to the pension benefits if a member dies
- Whether your scheme will comply with future legislative changes
As with other areas of business, it is crucial that you conduct sufficient research before deciding what scheme to go for. Take your basic list of requirements to several pension providers and discuss these with their advisers to find the best scheme for your company. It's important that you choose someone you trust and who can explain everything to you clearly.
As an employer, you will find it extremely useful to consult an independent financial adviser or pension adviser, who can assist you with the legislation and tax regulations that govern pension schemes. Ken Harrington, from Harrington and Thorne Financial Services, strongly recommends business owners to consult an independent adviser to help them set up their pension scheme, because overall it is a much more time-efficient and cost-effective way to set up the plan. With your adviser, you will analyse your company and where it sits in its particular sector, as well as look at what your competitors are offering their employees.
It's important that you offer a scheme that can compete with your counterparts to ensure you keep your employees happy. It is also important that you consult with your staff about what they want out of a pension scheme.
Finally, evaluate your budget limits before contacting pension providers and beginning your dealings with them. The provider that best suits your business will depend on a number of factors, including your type of business and what investments you make.
For more information about pensions, visit the Pensions Advisory Service website.
You can also search for a pension adviser on the Society of Pension Consultants website.
Your situation, as well as that of your employees, will change over time, so it is a good idea to review their pension needs and monitor the fund regularly to make sure it is giving good returns.