Other pension solutions

The typical scheme charges for a workplace pension in the UK can vary, depending on the provider and the type of scheme. The most common charges are scheme administration charges. In addition, an employer is required to make a minimum level of contributions based upon an employee's qualifying earnings.

Scheme administration charges

1. Set-up fees
   Many providers don’t charge set-up fees, especially for small employers. If charged, set-up costs can differ depending on the scheme size, the provider, and the level of support offered.
2. Annual management charge
   Usually 0.3% to 0.75% of the employee’s pension pot a year, depending on the scheme type and provider.
3. Ongoing administration fees
   Some schemes may charge a monthly fee for each employee, though many modern schemes include this in the annual management charge.
   
4. Payroll integration or middleware costs
   If your payroll software doesn’t integrate directly, you might need middleware. Costs can differ depending on the number of employees.
   
5. Additional costs to consider
   Adviser or accountant fees (if you use one)
   Time spent by internal staff

Employer pension contributions

The cost of a workplace pension to an employer in the UK depends on the type of scheme and the employee’s earnings. For employers who are required to comply with automatic enrolment requirements, the minimum legal contribution is 3%. This is based on an employee’s qualifying earnings between £6,240 and £50,270 a year (2025/26 tax year thresholds).

Tax relief is the money the government adds to an employee’s workplace pension, based on how the employer and employee pays into the pension and the employee’s tax status.

There are two main methods of adding tax relief:

1.      Relief at source (most common for workplace group personal pensions)

• The employee contributes to their pension from their net pay (after tax)
• Their pension provider claims 20% tax relief from HMRC and adds it to the pension pot
• If the employee is a higher-rate taxpayer, they can claim additional relief through their self-assessment tax return
• Example: Employee pays £80 → HMRC adds £20 → £100 goes into the pension pot
  

2.       Net pay arrangement (common in workplace occupational pensions)

• Contributions are taken from the employee’s gross pay (before tax)
• The employee automatically gets full tax relief at their highest rate
• There’s no need to claim anything back
• Example: If an employee earns £30,000 and contributes £1,000, their taxable income becomes £29,000

Why it matters

• It boosts pension savings at no extra cost to the pension owner
• It’s especially beneficial for higher-rate taxpayers
• Over time, it can significantly increase retirement income

Moving a workplace pension scheme from one provider to another in the UK is a structured process that involves co-ordination between the employer, the current pension provider, and the new provider. Here’s a step-by-step overview of how it typically works: 

1.    Review your current scheme

• Understand the terms, fees and any exit charges
• Check if there are any employer-specific benefits or valuable protections, features or guarantees that transferring employees could lose

2.     Define your objectives

• Are you looking for lower fees, better investment options, improved service, or digital tools?
• Decide whether you want to replace the scheme entirely or run both schemes in parallel for a time

3.     Choose a new provider

• Compare pension providers based on:
  • Charges
  • Investment options and performance
  • Employee tools and support
  • Compliance with auto enrolment rules
  • Retirement benefit options

4.     Consult employees

• While not usually legally required, it’s good practice to tell your employees about the change and consult with them
• Give your employees clear communications on how the transfer affects them

5.     Set up the new scheme

• Work with the new provider to:
  • Set up the scheme
  • Integrate with payroll
  • Make sure it meets auto enrolment requirements

6.     Tell the old provider

• Tell your current provider of your intention to stop contributions and transfer the scheme
• Ask for a bulk transfer if moving existing funds

7.     Transfer contributions

• You can either:
  • Stop contributions to the old scheme and start afresh with the new one, or
  • Arrange a bulk transfer of existing employee funds (requires consent and regulatory compliance)

8.     Communicate with employees

• Give your employees details of the new scheme
• Provide them with information about transferring old pension pots (if applicable)
• Offer support for questions or concerns

9.     Update payroll and records

• Make sure you align your payroll with the new scheme
• Keep records of the transition for compliance and audit purposes

10.     Monitor and review

• Regularly review the new scheme’s performance and employee satisfaction