Pensions attract employees!

One of the main benefits that attract employees is a pension scheme – it could not only attract staff but also keep them.  But how much do you know about the schemes?

There are a number of different pension schemes available to your employees and it’s a good idea to get a good understanding of each of them before you start to offer them as an added benefit of working for your company.

Occupational pension scheme;

This type of scheme is a private pension that is run by some employers.  These schemes are also known as works pensions, company pensions and superannuations.

There are three main benefits for your employee for being a part of such a scheme.  Firstly there is tax relief on their contributions.  Another benefit to the employee is that most employers tend to make payments into the pension as well as the employee’s own personal contributions which is often considered a great plus.

Thirdly, there are other benefits involved with such a pension scheme – life assurance or a pension for their dependents is often delivered hand in hand with such a pension scheme which is attractive to employees.  Check exactly what is on offer before you offer it to your employees.

Money purchase pension scheme;

These schemes involve both you, the employer, and the employee make contributions to the pension scheme by investing into the stock market – there is an obvious risk with this pension scheme however, so be careful when playing with the stock market…stocks rise and fall on a whim and in this difficult economic time there is no stability in the stock market.

When the employee decides to retire then they can decide to take some of the pension as a tax-free lump sum and use the rest as a pension or as a regular income through an annuity from an insurance company.

Personal pension scheme;

Such a pension is set up privately and does in fact receive some tax advantages that the others do not.  Obviously as the pension is a private one, set up privately by the employee they will be responsible for making the contributions to the scheme themselves.  However, employers also have the chance to make contributions to the scheme too.

Stakeholder pension scheme;

This is another private pension scheme although one that is low-charge.  They are bought from commercial financial services companies like banks, insurance companies or building societies.
These pension schemes must tick a few government standard boxes if they intend to provide good value for money, such as there being a cap on management charges each year of the pension.

These stakeholder pension schemes operate in the interest of the scheme holder and these criteria are enforced to provide the holder with a fair opportunity to a pension.

As an employer you may not be obligated to provide a pension scheme as part of a contract but it’s a good idea to check with a legal advisor first.  Now you know all the schemes available to your employers take some time to decide which option would be the best for both of you.

Any advice?

Do you have an opinion on pensions?  Let us know, we’d love to hear what you think…

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