Pensions


If your group employs staff, you will need to consider pension arrangements. Most employers already provide staff with access to some kind of pension arrangement. Since 01 Oct 2012 there is now a statutory duty (with phased auto-enrolment) for employers to ensure that a suitable work place pension scheme is offered to all employees.


The most common types of pension schemes fall into two categories:


  • defined benefit schemes

  • defined contribution schemes


Defined Benefit Schemes


Defined Benefit (DB) Schemes offer the employee a pension amount based on their length of service and earnings. Examples include final salary or career average earnings related schemes. DB Schemes are becoming less used and are likely to be considered impractical for most organizations in the Third Sector.


Defined Contribution Schemes


Defined Contribution (DC) Schemes are essentially investment plans where benefits provided at retirement are based on how much has been paid in over the life time of the scheme, and how the chosen investment has performed. The employee (as policyholder) contributes to the plan, the money is invested and a fund is built up. Regular contributions may also be made to the scheme by an employer.


Examples of DC schemes include:-money purchase schemes, group personal pension plans or group stakeholder pension schemes.


Stakeholder Pensions


Stakeholder pensions are a type of defined contribution scheme. They were originally designed for individuals that have no access to a workplace pension scheme, but they are suitable for a wide range of people including employees, workers on fixed contracts, people who are self-employed (and individuals who are working but can afford to make contributions). If you have five or more employees you must give them access to a stakeholder pension scheme unless you already offer another workplace pension scheme. 


There is no obligation for employers to make contributions to an employee's stakeholder pension but you will have a statutory duty to do so when the auto-enrolment rules come into effect for your company. Stakeholder pension schemes can be used by employers for automatic-enrolment purposes provided the schemes meet the necessary criteria. 


All Stakeholder Pension schemes must be registered with the Pensions Regulator.


Auto-enrolment and Work Place Pension Schemes


Over the next few years (up to 2017) all employers have a statutory duty to automatically enroll eligible employees into a qualifying workplace pension scheme (including an employer’s contribution) if they have not already done so. Auto-enrolment is being phased in. Staging dates for larger employers with will come into force before small or new employers, but it is important that you are aware of these forthcoming changes and start planning for them.


There is more information about auto-enrolment and help with preparing for workplace pension schemes on the Pension Regulators website.


National Employment Savings Trust (NEST)


The National Employment Savings Trust (NEST) is an online workplace pension scheme specifically designed to help employers meet their workplace pension duties and automatic enrolment. NEST is suitable for any size of UK organization employing paid staff, and can be used either on its own or alongside any other workplace pension scheme that an employer may already be using.