NOW: Pensions was set up by ATP of Denmark for employers requiring a scheme to fulfil their automatic enrolment duties.
It is the 3rd biggest Master Trust in the UK and works with businesses and payroll bureaus of all shapes and sizes. It provides its pension products to over 1.9 million employees.
Unlike other workplace pension providers Now: Pensions has a Defaqto rating of 2 stars.
Now: Pensions offers a defined contribution scheme that employers can use for auto-enrolment. After enrolment, contributions are invested to help the employee’s pension pot grow.
As it is now required by law, all UK employers have to put a workplace pension in place.
Now: Pensions is available to employers of all sizes and industries. It also meets the requirements set out by government. But it may be more suited to smaller businesses, rather than larger, well-known ones.
Before choosing Now: Pensions, make sure to consider its drawbacks:
Compared to other providers, Now: Pensions has a 2 start Defaqto rating and 2.5 / 5 rating on Trustpilot. It has a number of drawbacks which often doesn’t make it a great choice for workplace pensions.
If you are with Now: Pensions and wish to explore a more effective alternative don’t hesitate to get in touch on 02074425880 or email help@drewberry.co.uk
As it’s a master trust, multiple employers can use Now: Pensions. Master trust schemes mean different employers can use the scheme at the same time.
After enrolment, staff make monthly contributions along with their employer. Contributions are a percentage of the employee’s qualifying earnings. These are invested and managed by independent trustees on behalf of the employee.
The master trust makes all major decisions regarding the pension, including how and where the savings are invested. But employers can choose how much they contribute and employee contribution limits.
The employer, employee and the government contribute to the scheme. It’s important to note that the employer and the employee must pay the minimum contributions set out.
But both can choose to contribute more than the required minimums if they wish to.
There is a monthly fee for employers of £36 to operate the scheme. If the employer uses a payroll bureau, this charge can drop £20 a month for over five employees, or £12.50 a month for up to four.
Employees will pay a monthly administration charge of £1.50 a month or £18 a year to cover the administration tasks.
The amount employees and employers pay is set by the government, but both can contribute more.
The government requires staff to pay a minimum of 5% of their qualifying earnings into the scheme. Qualifying earnings include salary, wages, bonuses and commission, before tax and National Insurance.
As contributions come from an employee’s gross monthly salary, they can enjoy tax relief. The government pays 1% out of the 5% the employee contributes as tax relief.
While employees can choose to make a larger contribution than 5%, there is a cap on how much they can contribute. This is based on the maximum limits their employer sets or the employee’s annual allowance, whichever is lower.
Employers are required to contribute a minimum of 3%. This takes the overall contribution to 8% of the employee’s qualifying earnings. Employers can contribute more than 3%, and many do as an additional employee benefit.
Total Pension Contributions | |
|---|---|
Employee | 4% |
Employer | 3% |
Tax Relief | 1% | Total Contributions | 8% |
If employees have other pensions, they can transfer them into their NOW: Pensions pot at no extra cost.
They can also transfer their pension savings out of a NOW: Pensions fund. But the scheme they want to transfer to must confirm it accepts a transfer from a registered pension scheme.
Employees can access their pension savings from the age of 55 onwards. They can withdraw up to 25% of this as a tax-free lump sum. But the more money withdrawn from a fund pre-retirement, the smaller the fund when the employee retires.
If an employee leaves their job, they will no longer be an active member of the NOW: Pensions scheme. This means they will not pay any more contributions to the pension pot, nor will their employer.
Once the employer has marked the employee’s leaving date on their pension file, NOW: Pensions will write to the employee to explain their options.
NOW: Pensions has two investment funds based on where the employee is in their pension savings journey.
During the growth phase of saving, which is most of an employee’s working life, NOW: Pensions will invest savings into a ‘diversified growth fund’. This will happen when an employee is at least ten years from retirement.
The fund provides stable growth by spreading the money across different investments. These perform differently across various economic conditions. Here are some examples:
When an employee is 10-15 years away from retirement, savings will gradually move to the NOW: Pensions retirement countdown fund.
Doing so protects the value of the pension and helps generate returns similar to a savings account. This is achieved mainly by investing in money market funds and cash deposits.
It ensures their pension doesn’t drop significantly in value, which is essential as they near retirement.
In a NOW: Pension, savings are split across five risk classes which have varying risk profiles:
NOW: Pensions aims to achieve a 3% return over and above the return on cash across five years.
The diversified growth fund aims to achieve a risk exposure equivalent to 60% equity and 40% bond portfolio, but with a more diversified approach.
The NOW: Pensions custodian, BNY Mellon, will manage contributions on the employee’s behalf.
It is the role of the pensions investment manager to ensure the money is invested responsibly and will give the best return. The provider uses Cardano Risk Management to act on its behalf to make pension fund investments.
No. It is a workplace pension scheme that is separate from the state pension.
Yes, once an employee is auto-enrolled onto the NOW: Pensions scheme, they have the option to leave. If they choose to opt out within a month of being enrolled, their contributions will be refunded.
If they want to stop their contributions after one month, their employer cannot refund contributions. Any contributions made will remain invested until the employee either retires or transfers the money out.
If an employee dies before taking their pension savings, the value of their NOW: Pensions pot will be paid as a lump sum to their beneficiary at the discretion of the scheme’s trustee. Beneficiaries don’t usually pay personal or inheritance tax on this money.
There are advantages and disadvantages to this scheme, which are important to consider before signing up.
Employers can use a secure online system to enrol employees, set up contributions, and make payments. Employees can also access this online portal to do the following:
The NOW: Pensions investment plan adapts to the phases of the employee’s retirement journey. It aims to ensure their savings are invested in a way that’s appropriate to how near or far they are from retiring.
Employees can transfer pension savings in or out of their NOW: Pension pot as they wish at no charge.
NOW: Pensions provide employers with letter templates to communicate the pension scheme to their staff. They also provide all ongoing and statutory communications to employees, either printed and posted for free, or by email.
If an employee leaves their job, they can no longer contribute to their pension fund.
Employers pay £36 a month to use the pension scheme.
Employee members must also pay a 0.3% annual management fee on their savings and a £1.50 administration fee based on their earnings.
Most workplace pension providers allow employers to auto-enrol their staff. Before you decide which workplace pension scheme is right for your company, it’s a good idea to compare them to help you find the best fit.
Each provider has different eligibility criteria, investment funds, and tax relief models.
Choosing the right workplace pension scheme for your employees is an important responsibility. But with so many options available, it can seem complicated and overwhelming. This is where we can help you.
Our experts are here to take any stress and worry out of setting up or reviewing a workplace pension scheme and corporate benefits package. We can do all the hard work, so you can concentrate on what you do best – running your business.
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