Pensions are now on everyone's radar, thanks to the recent legislation changes and steady progression of automatic enrolment. If you've not yet got completely to grips with your pension priorities and are ‘staging’ this year or next, it’s time to start choosing a pension that's suitable for your practice. If you want a pension that's easy to understand, straightforward to administer, and leaves you feeling you are doing the right thing for your employees, here are some points to consider.
1. Check the charges
The annual management charge (AMC) matters - the lower the charge the more money there'll be in your employees’ pension pot on retirement.
The government has said that, from April 2016, no pension scheme used for auto enrolment should carry an AMC of over 0.75% a year. It's also banned a practice known as ‘active member discounts’ (essentially a financial penalty for those who leave the employer before retirement), and prevented commissions being taken from existing schemes used for auto enrolment.
Action point: Whether you're looking to set up a new scheme or thinking of using your existing pension scheme for auto enrolment, check the charges, commissions and hidden penalties to ensure that you are compliant.
Did you know? The RIBA Pension has an AMC of just 0.44% with no other charges or commissions.
2. Focus on the funds
The recent changes to legislation mean that employees will have more choice than ever before as to how to take their retirement money - taking everything in cash, keeping some of the money invested, buying an annuity or a combination of all three. A single default fund may therefore no longer meet everyone’s needs.
Action point: Make sure that your pension scheme offers your employees a choice of funds so that they can make full use of the new flexibilities, whether that means spending their retirement funds on the holiday of a lifetime or opting for an annuity and the reliability of a steady income.
Did you know? The RIBA Pension offers a wide fund choice with an investment strategy that is overseen by independent trustees who protect the interests of your employees.
3. A problem shared…
It may be tempting to throw money at the problem and make it go away by getting someone else to make the decisions for you. But as an employer the ultimate responsibility lies with you, so spend your pennies wisely. No provider will charge for making a proposal, nor should you pay your payroll provider or accountant to help you become compliant.
Areas where you may need advice include:
• Assessing your workforce and creating an auto enrolment action plan
• Employee communications, including presentations
• An annual review of the scheme
You may also choose to offer your employees access to financial advice, particularly around key times such as entering the scheme, about 15 years before retirement, and shortly before they retire.
Action point: If you are considering paying for advice or employee communications make sure you shop around for a variety of quotes.
Did you know? The RIBA Pension is partnered with Charles Stanley Financial Solutions who can provide tailored advice to you and your employees.
4. And finally…
The number of new pension schemes required far outweighs what the providers can supply so, if time is short, make sure your chosen pension provider has the physical capacity to take you on.
For more details contact the RIBA Pension team: email@example.com or 020 7307 3737.
Posted on Monday 21st July 2014