Auto-enrolment: Pension setup and admin charges more than the contributions

Lynnzer

It's ludicrous but my wife has a small business with one part time member of staff earning above the 10K but not substantially so.
She has another who will prefer to opt out. She earns around 6k per annum.
I understand the opt out procedure so don't need advice on that.
What I don't understand is that the amount of the contributions for the other member will be eaten completely by set-up and admin fees. Where's the sense in that?

I would prefer to pay that person more so she can pay into a personal pension. It makes more sense to me.
However if I do, do I still need to faff on with setting up an auto enrolment scheme anyway?

If so, and there's no-one in it, where's the benefit to the administrator? I mean no-one in the scheme and a pensions company managing it seems to me to be a chargeable event.
Stupid I may be but I'm not so thick as all that.

Can I not make a declared contribution to her personal pension instead and declare it to the pensions regulator to avoid the auto enrolment?

So where's the sense in this and does anyone have any tips or pointers.

lovinituk

Lynnzer wrote: »

She has another who will prefer to opt out. She earns around 6k per annum.

Do they still have to opt out if they earn below the minimum?

I must admit I haven't looked in to this much so far although have received our onboarding date (2017).

We have 2 part timers who both earn below the minimum.

I was under the impression that we still had to register for a scheme even if no staff currently qualified. I guess so you're ready if someone does eventually qualify?

Lynnzer

lovinituk wrote: »

Do they still have to opt out if they earn below the minimum?

I must admit I haven't looked in to this much so far although have received our onboarding date (2017).

We have 2 part timers who both earn below the minimum.

I was under the impression that we still had to register for a scheme even if no staff currently qualified. I guess so you're ready if someone does eventually qualify?

Can't answer that for you. However there's the crunch. If they do qualify for enrolment and tell you they don't want to, then the way I understand it is that you still have to set up a scheme, and of course pay the set up and ongoing fees for it. Bluddy stupid.

It seems the winners are going to be the financial institutions again.

zagfles

Who are you getting to set it up? Why not use Nest?

http://www.nestpensions.org.uk

Lynnzer

zagfles wrote: »

Who are you getting to set it up? Why not use Nest?

http://www.nestpensions.org.uk

But what's in it for them?
No-one joins as they prefer to do a personal pension instead but the scheme is compulsory?
Someone has to pay for it.

zagfles

Lynnzer wrote: »

But what's in it for them?
No-one joins as they prefer to do a personal pension instead but the scheme is compulsory?
Someone has to pay for it.

Nest is free for employers. If the employee doesn't contribute, they won't pay anything either. You were complaining about setup charges, there aren't any with Nest. If no-one contributes, no-one pays. Not you, not your employee.

Lynnzer

zagfles wrote: »

Nest is free for employers. If the employee doesn't contribute, they won't pay anything either. You were complaining about setup charges, there aren't any with Nest. If no-one contributes, no-one pays. Not you, not your employee.

Just been reading it. Great. Thanks.

Our own trade body the BIRA scheme for small shops has a scheme that is charging above the contributions that would be input. I presumed all such schemes would have similar charges being sceptical of the financial institutions..
However, it seems that NEST is perhaps a little too close to HM Government? Will the horse take water from the trough in some future financial catastrophe?

dunstonh

What I don't understand is that the amount of the contributions for the other member will be eaten completely by set-up and admin fees. Where's the sense in that?

Ongoing charges are capped at 0.75% p.a. Returns are unknown but typically around 5-7% p.a. after that charge.

So, what charges are you referring to?

Can I not make a declared contribution to her personal pension instead and declare it to the pensions regulator to avoid the auto enrolment?

Yes you can but she will have to opt out to do that.

However, it seems that NEST is perhaps a little too close to HM Government? Will the horse take water from the trough in some future financial catastrophe?

NEST is a product provider. A niche one that focuses on very small companies and small contributions that the big companies dont want to do. The Govt has no more access to NEST than any other pension. NEST are not the only small scheme provider, there are two others.

zagfles

Lynnzer wrote: »

Just been reading it. Great. Thanks.

Our own trade body the BIRA scheme for small shops has a scheme that is charging above the contributions that would be input. I presumed all such schemes would have similar charges being sceptical of the financial institutions..
However, it seems that NEST is perhaps a little too close to HM Government? Will the horse take water from the trough in some future financial catastrophe?

I wouldn't worry about that any more than investing in National Savings products. I have read criticism of Nest but that all seems to be coming from those with vested interests in steering employers to their more expensive alternatives.

In any case, it wouldn't be your problem particularly if your employees opt out anyway.

Lynnzer

zagfles wrote: »

I wouldn't worry about that any more than investing in National Savings products. I have read criticism of Nest but that all seems to be coming from those with vested interests in steering employers to their more expensive alternatives.

In any case, it wouldn't be your problem particularly if your employees opt out anyway.

Good advice. Thanks a lot.
Oh, if the charges are just those mentioned there's no reason why auto enrolment wouldn't be a good thing then, especially if we use salary sacrifice.

mania112

There are plenty of options.

Firstly you could look at The Pension Regulators list of 'assured' master trust's (which is the default method of providing an auto-enrolment solution)

http://www.thepensionsregulator.gov.uk/trustees/master-trust-assurance.aspx

But this list includes NEST, which is terrible to deal with, so i'm not sure how confident i'd be relying on this list.

Maybe:

https://www.defaqto.com/advisers/auto-enrolment?ProductTypeView=StarRatingsCenter_GroupDefinedContributionSchemes_Trust_ProductDetails&Ratings=&Products=&Product=&Search=&Sort=&HideHeaderAndFooter=False

Take a look at the top ranked schemes here.

I've started to use Smart Pension because it remains free to employers and has a fairly intuitive online system to make setup easy.