You can use an existing pension scheme if it meets the legal requirements, and you are able to confirm this with your Pension Provider. If you don't have a scheme set up already you can engage with a Pension Provider to set one up or contact Your Island Pension (YIP) to set up a scheme with them.
Although there are lots of different Pension Providers, there are two types of pension schemes, and these are explained below. There is information that you will be responsible for obtaining from your Pension Provider to confirm your scheme complies with the Law and this is explained below. You will need to keep these records, so you can produce these should an audit be carried out by Revenue Service.
Defined Contribution schemes
- The first, and most common type of Pension Scheme, is a Defined Contribution (DC) scheme. This is where the contributions you and Employee pay are invested into individual pension pots. When your Employee retires, the value of their pension pot will be paid to them as a pension.
- Your Pension Provider will be able to provide you with the following:
- confirmation that your Defined Contribution scheme has been approved, or deemed to be approved, under section 150 (2) or 157A of the Income Tax Law.
- confirmation that your Defined Contribution scheme falls under the Pension Scheme and Gratuity Scheme Rules 2021 or under an equivalent or similar statutory pensions regulatory regime in the British Islands, or other approved jurisdiction.
Defined Benefit schemes
- The second is called a Defined Benefit (DB) scheme, and this is a scheme where the contributions paid by you and your Employee are used to provide your them with a certain amount of pension benefits. Defined Benefit schemes are unlikely to be used for Secondary Pensions, and if you use one you should contact your Pension Provider for details on the scheme.
- Your Pension Provider will be able to provide you with the following:
- confirmation that your Defined Benefit scheme has been approved, or deemed to be approved, under section 150 (2) of the Income Tax Law.
- confirmation that your Defined Benefit scheme falls under the Pension Scheme and Gratuity Scheme Rules 2021 or under an equivalent or similar statutory pensions regulatory regime in the British Islands, or other approved jurisdiction.
- a report from an independent Actuary who is not linked to the employer that confirms:
- they consider the benefits for most of the active members are likely to be at least equivalent to the benefits they would receive if they paid the Minimum Contributions in a Defined Contribution scheme; and,
- an opinion confirming the scheme funding arrangements are expected to meet the cost of the benefits when they are paid
Using Your Island Pension (YIP), another pension provider, or multiple pension providers
- If you already provide a pension scheme that meets the legal requirements and you have made it a condition within your worker's Contract of Employment there won't be anything else for you to do.
- You do not need to use the same pension scheme or type of scheme for everyone however you will need to ensure that it is not discriminatory for you to do this, for example, if you only do this on a case-by-case basis or for certain groups of your workforce.
- You can use multiple schemes for your staff if you wish, therefore if you want to offer different pension schemes to different Employees you can, so long as the schemes meet the legal requirement (your Pension Provider will be able to provide you with confirmation they do). For example, you might offer a Defined Benefit scheme but for short term contract workers you wish to provide a Defined Contribution scheme.
- If you only intend to offer different schemes on a case-by-case basis or for specific members of your workforce, you will need to consider this very carefully to ensure this is not discriminatory.
- You will need to ensure that you provide paperwork to your Employee in a timely manner, they need to be allowed time to review the information you have given and get answers to any questions they have.
Deferral
- You can defer when you enrol your Employees for 3 months, this means that you can group new entrants together and enrol them at the same time, for example once each quarter.
- If you defer enrolment so you can combine your new entrants together and enrol them in batches on a particular date you would need to make sure you have considered how this is going to work for your organisation so that you don't exceed 3 months before you enrol them. For example, you might decide to enrol new staff at the start of each quarter, so if they are starting on 25 March, they would be enrolled into your scheme at the start of the next quarter on 1 April and their first contributions would be deducted from this date too.
