Choosing a pension scheme for your small payroll clients

Many bookkeepers will want to help their small and micro payroll clients through the automatic enrolment (AE) process. If your client employs at least one member of staff then they will have AE duties to perform. If an employer has eligible jobholders they must act to enrol them into a qualifying AE pension scheme at the staging date.

If an employer has non-eligible or entitled workers, then the employer does not have to set up a pension scheme. Both non-eligible jobholders and entitled workers may decide they want to opt in or join the pension scheme. If these employees chose to do so then the employer must act to fulfill their rights. Therefore, it would be advisable for your client to have chosen a workplace pension scheme.

Setting up a pension scheme

If your client already has a workplace pension scheme, you must check to see if it meets the requirements under automatic enrolment. You would also need to confirm whether the scheme accepts all employees. Your clients will need to contribute at least 1% of the employee's qualifying earnings into the pension pot. This contribution rate will incrementally increase over the next few years to 3% and eventually 5%.

Types of Schemes

There are a large number of schemes for clients to choose from, including defined contribution (DC), defined benefit (DB) and hybrid schemes. This large choice can make the decision-making process even more confusing for employers. NEST is one scheme that has been specifically set up to cope with the large number of employers due to go through the process of automatic enrolment. It has been set up by the government and is free for employers.

The Pensions Regulator (TPR) believes that most employers will chose a DC scheme as these pension schemes typically are run by large and expert pension providers. These schemes cost less overall and are free to employers, requiring less input from the employer. TPR states that small employers will not benefit from setting up a trust based pension scheme as they tend to be expensive and time consuming to run the scheme effectively.

Helping clients choose a scheme

You payroll clients may ask you for some guidance when it comes to selecting an automatic enrolment pension scheme for their employees. You will need to highlight certain important factors to your clients and check that it meets the requirements to qualify for AE. You should look at factors such as cost to the employer, whether it is compatible with your existing payroll software and what tax relief the scheme uses.

Some schemes may only accept employers with a minimum number of staff or staff who earn a certain amount. Check to confirm that the scheme can be used for all staff. Check what the pension provider charges clients and how much the staff will have to pay. Certain providers are charging in different ways. Some are charging per month, others have a setup charge and several are free.

Payroll & Pension Compatibility


It will be easier for you and your client if the chosen pension scheme is compatible and supported by your payroll software. Good payroll software will handle all of the automatic enrolment tasks for you, including employee assessment, batch enrolment, production of AE communications, postponement, opt in, opt out and requests to join the scheme and ultimately reporting. Your payroll software should work with your pension scheme to produce the necessary contribution and enrolment files. Check with the software provider to see what pension schemes it supports.


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