How To Set Up a Pension Scheme for Your Business

Monday, 31st March, 2025

Providing a pension scheme for your business is a smart move - not just for your employees but for you as a business owner. It helps attract and retain talent, ensures compliance with legal requirements, and even offers tax benefits. But where do you start? Here's a step-by-step guide to setting up a pension scheme for your business.

Step 1: Understand Your Legal Obligations

If you employ staff in the UK, you are legally required to provide a workplace pension under the auto-enrolment rules. The law states that:

✅ All employees aged 22 or over who earn at least £10,000 per year must be automatically enrolled.

✅ Employers must contribute at least 3% of an employee's qualifying earnings, while employees contribute 5%.

If you're self-employed or a company director without staff, you're not required to set up a pension, but it's still a great way to secure your financial future.

Step 2: Choose the Right Pension Scheme

There are several pension schemes available for businesses, including:

🔹 Workplace Pensions (Auto-Enrolment Scheme) - These are the most common options, and popular providers include NEST, The People's Pension, and Smart Pension.

🔹 Defined Contribution Schemes - Contributions are invested, and the final pension pot depends on investment performance.

🔹 Defined Benefit Schemes - A more traditional pension that guarantees a set retirement income, often used by larger businesses.

🔹 Self-Invested Personal Pensions (SIPPs) - Ideal for business owners who want more control over where their pension is invested.

Consider factors such as fees, investment options, ease of management, and employee needs when selecting a provider.

Step 3: Register & Set Up Contributions

Once you've chosen a scheme, follow these steps:

1️⃣ Register with The Pension Regulator - Ensure compliance by informing them about your scheme.

2️⃣ Set Up Payroll Integration - Most pension providers offer payroll integration to automate contributions.

3️⃣ Decide Employer Contributions - While the minimum is 3%, offering higher contributions can be an attractive employee benefit.

Step 4: Communicate with Your Employees

It's important to inform your employees about the pension scheme, including:

📢 How much will they contribute, and how much the business will contribute.

📢 The benefits of saving for retirement.

📢 Their right to opt out (though auto-enrolment means they will be enrolled by default).

Providing clear, simple information ensures your employees understand and appreciate their pension benefits.

Step 5: Manage & Review the Scheme

✅ Monitor Contributions - Ensure payments are made correctly and on time.

✅ Stay Compliant - Keep up with changes in pension regulations and adjust accordingly.

✅ Encourage Participation - Regularly remind employees of the benefits and provide resources to help them plan for retirement.

As your business grows, you may want to review your pension scheme and explore better options for both you and your team.

Why Setting Up a Pension Scheme is a Smart Move

✔ Attract & Retain Talent - Employees value pension contributions as part of a competitive benefits package.

✔ Tax Advantages - Employer contributions are tax-deductible, reducing your business's tax bill.

✔ Secure Your Own Future - If you're a business owner, a pension ensures financial stability in retirement.

Need Help Setting Up a Pension Scheme?

Navigating workplace pensions can be complex, but Pro Tax Plus Accountants is here to help! We can guide you through choosing the best scheme, handling payroll integration, and ensuring compliance with auto-enrolment laws.

📩 Get in touch today for expert advice on setting up your business pension scheme.