What is the best company pension scheme?

The most appropriate pension scheme for an employer to provide will depend on a number of factors. Certain requirements have been put in place by the government for automatic enrolment schemes, these include:

  • An appropriate default investment choice with a minimum level of governance
  • A maximum annual management charge of 0.75% for the default investment choice
  • An opt out facility should an employee not wish to continue in the scheme
  • Meeting the minimum contribution levels below, (the requirements depend on the salary definition being used by the company to calculate the contribution amounts);
  AE Minimums Set 1 Set 2 Set 3
Salary Definition Qualifying Earnings (£5,824 to £43,000 in 2016/17 tax year) Basic Salary Pensionable Earnings* Total Earnings
First Transitional Period Staging Date to 5 April 2018 Total 2% (Min. Employer 1%) Total 3% (Min. Employer 2%) Total 2% (Min. Employer 1%) Total 2% (Min. Employer 1%)
Second Transitional Period 6 April 2018 to 5 April 2019 Total 5% (Min. Employer 2%) Total 6% (Min. Employer 3%) Total 5% (Min. Employer 2%) Total 5% (Min. Employer 2%)
Steady State 6 April 2019 Onwards Total 8% (Min. Employer 3%) Total 9% (Min. Employer 4%) Total 8% (Min. Employer 3%) Total 7% (Min. Employer 3%)

Pensionable Earnings under Set 2 must be equal to or greater than Basic Salary and at least 85% of total earnings across the scheme

In order for a company to be compliant with the Automatic Enrolment legislation, the scheme will need to meet the minimum requirements.