Pension Plan For Small Businesses

A Guide To Operating A Pension Plan For Small Businesses

It can be harder for small businesses to offer the range of benefits they'd like to. It is possible, however, for even the smallest business to provide a good pension plan.

Small businesses can sometimes struggle to retain staff. One of the ways to minimise staff turnover is to offer an attractive benefits package. Unfortunately, by their nature, small businesses don't have a lot of extra cash to play with when it comes to putting benefit arrangements in place, so they have to find affordable, yet workable solutions to problems such as providing a pension plan. Find a safe limit and stick to it. It's much easier to increase your payments than decrease them.

Many pensions companies operate pension plans for small businesses. Since the Stakeholder Pension Scheme was introduced, any company with over 5 employees should be able to offer some form of pension plan. If you run a small business and you are thinking of setting up a pension plan, here are some things to consider:

• What Can You Afford? - If you are setting up a scheme that you pay into as well as your employee, you need to decide how much you can afford to pay. For the employee, anything you pay is a bonus, but if you commit to paying too much, you may put yourself in a difficult position if your business has any financial trouble. Find a safe limit and stick to it. It's much easier to increase your payments than decrease them. Remember that, if you have over 5 employees, you are obliged to provide a stakeholder pension plan, but you are not obliged to contribute to it.
• How Will It Be Run? - Small businesses can administer their own pension plans, or they can contract them out to a specialist provider. Which of these options you choose is largely down to the number of employees you have, and the type of pension plan you choose to operate.
• What Type Of Pension Plan? - Pension plans for small businesses can be run slightly differently from those operated in large firms. The size of the fund that's invested in a FTSE100 company, for example, requires that independent trustees be appointed and that the whole scheme is open to inspection. Small businesses can choose to operate a pension plan with trustees, but they can also choose to run a Group money-purchase personal pension scheme or GPP. This scheme does not require the appointment of trustees, give the staff more choice over which funds their money is invested in, and only require a pensions adviser and an administrator to run them.
• Get Some Advice - If you are going to set up a pension plan for your small business, talk to an expert. An independent pensions adviser will be able to talk through your options and help you to select the scheme that will work best for you and your employers.