With the deadline approaching for the smallest businesses pension auto enrolment deadline in Cheltenham, Gloucestershire getting closer ESB reviews your options.
The subject of workplace pensions is not one that most busy entrepreneurs want to think about.
However research shows that almost all business people realise they must provide pensions. The final 1 million small and microbusinesses, those with less than 50 staff, will have to sign up by early 2018.
The rule applies to anyone aged between 22 and state pension age who earns more than £10,000 per year, though they may choose to opt out.
Some 206,000 employers have signed up 6.5 million workers so far, according to the Pensions Regulator.
Many of the smallest businesses currently have limited choices, as some big providers do not want to deal with lots of little schemes.
Some providers levy charges on the employers to establish a scheme, typically a few hundred pounds.
After that it is usually free for the employer, but staff have to pay annual management fees of between 0.3 and 0.8 per cent of assets. They may also have to pay extra to move their pension pot into a new product, or for letters and other documents.
By April 2019, according to the Department for Work and Pensions (DWP), automatic enrolment into workplace pensions will generate £15 billion in new pension savings every year.
That creates an opportunity. So far roughly 30 insurers and 70 “master trusts” — who group multiple employer schemes together and funnel them to an insurer — have lined up to serve this market. Among them are NOW: Pensions, a subsidiary of Danish pension scheme ATP, and B&CE, a not-for-profit company around since 1942. The latter runs a scheme badged as The People’s Pension with 2m members and more than 30,000 employers,
But only seven of these providers will deal with the smallest employers.
Some start-ups are trying to move in as well. One is Smart Pensions, an online platform launched in May 2015 that also uses Legal & General to manage its assets. L&G’s venture capital arm recently took an undisclosed stake in the company.
But these companies face a formidable competitor in Nest, the government provider.
Nest was set up to plug the pensions gap before the state decided to compel companies to do the job. It is free for SMEs and 100,000 use it, with more than 3.3m members, half the market. Nest charges just 0.3 per cent for its annual management fee, although it also levies 1.8 per cent on contributions. This enables it to bring in income early: Smart Pensions and others have to wait for the pots to build.
Still, Nest burnt through £104 million in 2015/16 and had just £24 million income. It still owes the government £387 million, giving Whitehall a big incentive to allow it to keep competing with private providers.
So if you would like some guidance for your organistion’s pension setup from someone with several decades of financial and pension planning experience here in Gloucestershire you can either ring us now on – email us on firstname.lastname@example.org or click the Contact Us buttonor please fill the form at the bottom of the contact us page.