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The cost of setting up a workplace pension

2nd Aug 2016

Every employer has to comply with workplace pension duties and there are costs involved. Even if you don’t have to enrol any eligible staff you’ll need to spend time, if not money, on making sure you stay within the law.

When you pay for advice or pay for your workplace pension scheme to be set up and administered you need to understand and agree which tasks you are going to do and which will be outsourced, so that nothing gets missed.

Advice costs: The pension you choose needs to suit you and your employees and you may be asked to prove that you’ve carried out due diligence at some point in the future. This means that you should carefully consider your pension options as it’s possible that some time down the line an employee could ask you to justify your choice if the pension you’ve chosen fails to perform well.

You can do your own research and reach your own conclusions or employ the services of an independent financial adviser (IFA), who can research the market and make recommendations for you. This is the costliest option and can set you back hundreds or even thousands of pounds. For a few hundred pounds you can use a workplace pension selection services such as LP Auto Enrolment Solutions or Pension Playpen. These services will give you a list of suitable pension schemes based on your needs.

Advice cost: £0-£2,000

Pension scheme set up: Costs vary from pension scheme to pension scheme. With some schemes there’s no charge to the employer for set-up, others charge a one-off fee, which might be discounted if the pension is set up via your payroll company.

Pension set-up cost: £0-£500+

Payroll set up: Your payroll company is likely to play a pivotal role in your pension set up and management. You’ll need to pay a one-off fee to set your pension up. This fee will include the cost of assessing your workers, applying to the pension provider to set the scheme up and aligning payroll software with pension software so that the contributions can be taken.

Payroll set-up cost: £300-£500 dependent of number of employees

Ongoing costs: There will be several costs for managing the pension scheme. First, you’ll need to make contributions to the scheme as set out in the table, below. You may also have to pay a monthly or annual cost to the pension provider. This cost often varies and depends on the number of employees a business has. Finally, there’ll be a fee to pay to your payroll bureau for ongoing worker assessment, managing opt ins and opt outs, keeping track of changes to contribution levels, record keeping and automatic re-enrolment.

Ongoing costs: These will vary widely depending on the cost of contributions, the pension you’ve chosen and the number of employees you have.

The Pensions Regulator Employer Contributions Calculator

The Pensions Regulator Guidance: Understanding your costs

Want some help with your workplace pension?
Biznus Payroll can help you with your pension choices, pension set up and ongoing management.
Get in touch:
01373 228300