Unlike credit card deals, a master trust is for life


The People’s Pension has announced that they will be introducing a £500 setup fee later this month for all new schemes. This move suggests that big master trusts have been subsidising the setup costs for employers out of reserves, a method which is unsustainable in the long term.

We are still waiting to see how NOW: Pensions respond, but the smart money is they will go the same way. Furthermore, NEST Pensions are also reviewing initial charges, which may result in a similar outcome.

This means that the 2million or so small employers that are due to stage over the next few years are unlikely to have access to a ‘free’ scheme which has been a key driver for many when choosing an auto-enrolment solution.

Whilst NEST remains free to the employer (in terms of set up) the initial charge (especially if this is increased) can make it a rather expensive choice for certain employees and something employers should be mindful of if they are ever asked to justify their selection decision.

£500 to set up a pension scheme that will soon be receiving 8% of an employee’s wage cannot be considered expensive. However it is if you are not offered any choice and this highlights the need, more than ever, that employers should take advice to ensure the scheme that is selected is appropriate for both their business and their employee’s needs.

Johnson Fleming’s Development Director David Roderick states:

“Averages of 45,000 businesses per month are set to stage over the next few years and they may not have access to a ‘free’ scheme. This has been a key driver for many when choosing an auto-enrolment solution and these changes will have a significant effect on the choices that small businesses make.

“Here at Johnson Fleming we have developed three comprehensive solutions to help employers with auto-enrolment. The services offer different levels of support using cost, time, and responsibility as distinguishing variables”