How to choose the best workplace pension
How to choose the best workplace pension
This guide contains the questions you’ll need to ask, and the things you’ll need to think about, to find the best workplace pension scheme for your business
1. Introduction: Why choosing the right workplace pension matters
Choosing a workplace pension provider may feel like a daunting prospect. However, we’ve written this brief guide to give you all the information and help you might need to help you through the process.
You may be a small business taking on your first members of staff, or perhaps you work for a larger and more established company which is reviewing its existing pension arrangements. Either way, this guide contains the questions you’ll need to ask, and details all the things you’ll need to think about, to find the best workplace pension scheme for your business.
2. Understanding workplace pensions
A workplace pension is a savings scheme which you, as an employer, must offer to your employees and oversee for them. It exists to help them save money for their retirement. By law, you must offer a scheme, make it available to eligible employees and make contributions to it on their behalf. This process is known as automatic enrolment (see our A guide to auto enrolment for more information) and there are many different providers who can provide a scheme for you.
For some employers, choosing a provider and setting up a pension scheme is something they want to do quickly, with the minimum of fuss. Typically, these smaller companies will just want to be sure that they are meeting all their legal obligations and then be free to spend their time getting on with what they do best – running their business.
At the same time, though, many employers look at their workplace pension scheme in a broader context. They recognise pension provision as a way of helping their employees towards better financial outcomes in retirement and, by going beyond the legal minimum, as an opportunity to reward, engage with, attract and retain staff.
Whatever your own outlook is, there are plenty of providers to choose from so it’s important to work out which will be the best workplace pension to suit your business and your employees.
3. What to look for in a workplace pension provider
There are several factors you’ll need to consider. First of all, you need to bear in mind that some features and benefits will be useful for you, as the employer and administrator of a workplace pension scheme, while others are for the benefit of your employees, as scheme members.
How easy a provider makes it to set up and run your scheme is a great starting point. Will their platform integrate with the software system you use for accounts and payroll? How long will your ‘routine’ pension administration take, how often will this be, and how easy will it be, on a day-to-day basis?
That leads, almost naturally, to thinking about a provider’s level of customer support, for both businesses and scheme members – how easy will it be for you and your employees to contact the provider and get help? Can you check independent customer service reviews and ratings online?
A good workplace pension provider will combine good customer service with a wide range of investment options and a fair deal when it comes to the charges you and your employees will pay.
4. Top workplace pension providers in the UK
See how Smart Pension compares to other workplace pension providers
| Smart Pension | Aviva | Natwest Cushon | Nest | NOW: Pensions | Penfold | Royal London | Scottish Widows | Standard Life | The People's Pension | |
|---|---|---|---|---|---|---|---|---|---|---|
| Trustpilot rating | 4.6 (Excellent) | 4.1 (Great) | 4.4 (Excellent) | 4.1 (Great) | 3.1 (Average) | 4.4 (Great) | 3.9 (Great) | 4.2 (Great) | 3.7 (Average) | 4 (Great) |
| Employers signed up | Over 70,000 | Over 20,000 | Ove 20,000 | Over 1 million | Over 20,000 | Ove 3,000 | Ove 19,000 | Ove 19,000 | Over 30,000 | Over 100,000 |
| Number of members | Over 1 million | Over 5 million | Over 20,000 | Ove 12 million | Over 2.4 million | Over 18,000 | Over 1.5 million | Over 3 million | Over 1.5 million | Over 6 million |
| Mobile app |  | |  | | | | | | | |
| Find and combine pensions tool | |  | | | | | | | | |
| Payroll integration | | | | | | | | | | |
*Our list of top workplace pension poviders is based on size.
Information is taken from company websites. Comparisons based on information sourced September 2024 and will be updated every six months. The information contained here is for general information purposes only and we accept no responsibility or liability for the use, reference to or reliance on any it. We encourage you to do your own research of pension providers and the information shown is not considered advice.
How Smart Pension investment performance compares to competitors over the last three years
| Pension provider | 3 years cumulative performance |
|---|---|
| Smart Pension (D) | 20.8% |
| Aviva (E) | 20.2% |
| Penfold (B) | 16.2% |
| Royal London (G) | 16.1% |
| Nest (F) | 14.7% |
| Standard Life (J) | 14.5% |
| Legal & General (I) | 13.6% |
| The Peoples Pension (C) | 12.0% |
| Scottish Widows (H) | 9.6% |
| Now Pensions (A) | 0.6% |
Source: Trustnet of charges. Funds used NOW:pensions - NOW Pensions Diversified Growth, Penfold - BlackRock MyMap 6 D Acc, The Peoples Pension - Global Investments (up to 85% shares) 0.5% Pn, Smart Pension - Smart Sustainable Growth, Aviva - Aviva Pen My Future Focus Growth Pn S3, NEST - NEST 2040 Retirement Pn, Royal London - RLP Governed Portfolio 4 Pension, Scottish Widows - Scottish Widows Pension Portfolio Three Pension Series 2, L&G - L&G Pension (PMC) 2065-2070 Pathway Pn 3, Standard Life - Stan Life Sustainable Multi Asset (AP) Pn S3. Natwest Cushon isn’t included in these figures because their fund is on Trustnet, but only has one year of performance which is not a good enough long term comparison. Past performance is not an indicator of future performance.
For more workplace pension comparisons, visit our Compare Smart Pension page.
5. How to choose the right pension scheme for your business
When choosing which workplace pension scheme and provider, there are several factors employers should consider. These include:
Up-front costs
Whether there is a cost – and, if so, how much – is a big consideration in setting up a workplace pension scheme. You will need to establish if the provider charges a set-up fee for any systems, software, membership or processes that may need to be implemented.
Ongoing charges
Another factor to consider is whether there are any future charges involved. Will the employer and employees have to pay the provider for the ongoing management of the workplace pension scheme? If so, how much?
Payroll compatibility
Will the payroll system you are using (or intend to use) integrate with your chosen pension provider’s software and systems? Some costs are often involved in the integration, so you’ll need to find out what these are likely to be.
Investment options
You’ll need to consider what types of investment funds are available. It may be important to your company and your employees that the provider can offer you funds that cater to different needs, such as ethical, sustainable and/or Shariah-compliant funds, or different appetites for risk. Some of the better-known providers only offer a few investment funds to choose from.
If being able to choose from a variety of different funds is something you think your employees will value, then a provider like Smart Pension could be a good choice. Smart Pension provides up to 18 investment funds to choose from, including a Shariah-compliant fund, which is ideal for those members who prefer to manage their own pension savings and investment journey to retirement . They also offer funds with strong Environmental, Social and Governance (ESG) practices which are working to reduce their carbon emissions.
Their Smart Sustainable Growth Fund has a 70% allocation to an index of global companies which aims to be net zero by 2040. This means balancing greenhouse gas emissions that are produced with the emissions that are removed from the atmosphere.
Tax relief arrangements
There are two main tax arrangements when it comes to how pension contributions are collected. You’ll need to find out whether your own payroll software and your provider’s systems support a net pay or relief at source arrangement (Smart Pension’ s standard offering is a net pay arrangement, rather than a relief at source method).
To learn more about taxation and benefits, see our Guide to workplace pensions.
Ease of set-up and use
A workplace pension scheme that is easy to set up and manage may be high up on your list of priorities, so you’ll need to find out more about what each provider offers. You may also want to know how much an employer will need to do to meet their legal auto enrolment obligations, and how much help you’ll get from the provider.
Communications
Ongoing communications with employees are part of an employer’s auto enrolment duties. You will need to find out how these communications will be handled. Many providers, like Smart Pension, can do this for you as a service. They have the software to manage a workplace pension scheme behind the scenes, communicating with employees and helping employers to stay compliant. The administrative tasks of composing and distributing communications to all staff is made easier for employers.
Where the provider doesn’t offer this service, the onus of communicating with employees will be on you, as the employer.
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Reviews
It’s usually a good idea to look at independent reviews to understand people’s thoughts and opinions on their experience with different pension providers. Independent review platforms include Trustpilot, Defaqto and Google. Some schemes have dedicated a reviews page on their website like Smart Pension which you might find helpful.
For more information on choosing a pension scheme, you can visit The Pension Regulator’s website. You can also get advice from an Independent Financial Adviser or your accountant.
6. Setting up your workplace pension scheme
How long it takes to set up a workplace pension will depend on the provider, but with an online platform like Smart Pension you can have your workplace pension set up quickly and easily.
Assess employees
Once you have chosen your pension provider, you have made the first step in setting up your workplace pension scheme. You will then need to assess your workforce against the employee eligibility criteria to decide which category each individual falls into.
Once you have carried out your employee assessment, you will need to put those who qualify into the pension scheme. You will also need to work out how much you and the employee will need to pay into the pension scheme, by doing a calculation on qualifying earnings. Before that, you will have to decide which basis to use – banded or unbanded earnings. To learn more about qualifying earnings, read our Guide to auto enrolment. You’ll then need to arrange for the contributions to be made and agree the dates when the contributions will be paid into the scheme with your pension scheme provider.
| Eligible jobholder | Non-eligible jobholder | Entitled worker | |
|---|---|---|---|
| Age | between 22 and State Pension age | between the ages of 16 and 74 | between the ages of 16 and 74 |
| Earnings | more than £10,000 a year | between £6,240 and £10,000 a year | earn less than £6,240 a year |
Inform employees
Ongoing communications with employees are part of your auto enrolment duties as an employer. Once you have carried out your employee assessments, enrolled those who are qualified and worked out contribution levels, you must inform your employees about auto enrolment and how it affects them. You must do this within six weeks of the duties start date, which should be the date they joined the company.
Employees must also be given information on how to opt out of the pension scheme and how to opt back in again. You can find more information about opting in and opting out in our Guide to auto enrolment.
Declare compliance
Within five months of their duties start date, employers must submit a declaration of compliance to The Pensions Regulator to confirm that they have carried out their automatic enrolment duties. The Pensions Regulator has a checklist you can use to help you gather all the information you need to complete your declaration online.
7. FAQS
What’s the difference between different workplace pension providers?
Our comparison table highlights some of the main providers in the market and the differences in the features and benefits they offer. It’s always best to carry out your own research and seek advice from a financial adviser where needed.
How much will it cost me to set up a workplace pension?
As with any market that’s served by many different providers, how much it will cost to set up a workplace pension will vary from one provider to another.
You’ll need to think about not only the ‘up-front’ cost of setting up a workplace pension scheme, but also the cost of other things, such as payroll integration and advice from a financial adviser or accountant. Similarly, you should make allowances for the time involved in not only getting things up and running but also managing your ongoing duties.
How much should I expect to pay in fees?
As with any market that’s served by many different providers, how much it will cost to set up a workplace pension will vary from one provider to another.
You’ll need to think about not only the ‘up-front’ cost of setting up a workplace pension scheme, but also the cost of other things, such as payroll integration and advice from a financial adviser or accountant. Similarly, you should make allowances for the time involved in not only getting things up and running but also managing your ongoing duties.
You’ll need to think about how much your company will be charged by the pension provider for using their scheme, as well as any fees your employees will be charged for managing their pension and any other fees like monthly charges.
The good news is that The Pensions Regulator, which oversees all providers, requires that members don’t pay any more in charges beyond an industry-wide cap. In percentage terms, that limit is set at 0.75% of funds per year.
What are the legal requirements for workplace pensions in the UK?
It is mandatory for all UK employers to offer a workplace pension scheme (that meets certain criteria) to qualifying employees, and to make contributions to it. [Insert eligiblilty table here]
An employee will qualify for automatic enrolment into the workplace pension scheme if they are classified as an eligible jobholder. To be an eligible jobholder, you must be:
- aged between 22 and State Pension age
- earning more than £10,000 a year
- usually working in the UK
There is a legal minimum amount that you and your employer must, between you, contribute towards your pension. This is known as the total minimum contribution and is expressed as a percentage of your earnings. It’s currently set by law at 8%. To find out more about employer and employee contribution rates, see chapter 4. Pension scheme contributions of A guide to auto enrolment.
| Employee contributions | Employer contributions | Total contributions |
|---|---|---|
| 5% | 3% | 8% |
Who is the best workplace pension provider?
A pension is a long-term financial product, one that exists to help your employees to the best financial outcomes when they have retired from the workplace. Similarly, you should view the relationship between your business and your workplace pension provider as something that’s built for the long-term, too.
As such, it’s important to get the decision right. Taking time to understand the needs of both your business and your employees is an important step in choosing a workplace pension provider. Comparing the benefits and features offered by different providers will help you find one that’s a great match for your company.
8. Conclusion: helping you make the best choice
A pension is a long-term financial product, one that exists to help your employees to the best financial outcomes when they have retired from the workplace. Similarly, you should view the relationship between your business and your workplace pension provider as something that’s built for the long-term, too.
As such, it’s important to get the decision right. Taking time to understand the needs of both your business and your employees is an important step in choosing a workplace pension provider. Comparing the benefits and features offered by different providers will help you find one that’s a great match for your company.
Visit our workplace pension comparison page to learn how Smart Pension compares to some of the top workplace pension providers.
