Now that the awareness campaign for “My Future Fund” has started, workplace pensions have very much moved into the spotlight. Rather than thinking this is a default situation, employers are asking an important question: Should we rely on the new Pension Auto Enrolment system, or set up our own company group pension scheme? What are the Pension Choices available?
This is what we feel you need to consider before making any decision.
Pension Auto Enrolment – The New Baseline
Auto Enrolment is a government-led initiative. It is designed to make sure most workers are automatically saving for retirement. It applies to employees who meet certain age and earnings criteria and who do not have a private pension arrangement already in place. Qualifying individuals will be automatically enrolled in the scheme. Both employers and employees contribute a set percentage of salary, with the State adding a top-up. Access must be given to employees from the first day of employment.
The benefits for employers include not having to design or manage your own company pension scheme. In addition, it allows the requirement to provide access to a pension to all employers simple to comply with and the structure is set for you.
But there are two main considerations:
- There is limited flexibility in contribution levels and investment options.
- It may not be as competitive as a bespoke scheme in attracting and retaining talent.
Company Group Pension Scheme – Tailored to Your Business
This option would be the traditional route for companies that provide a group pension to the employees. It is set up by the employer specifically for their own employees and can be very flexible. Employers can choose contribution levels, scheme rules and investment options. Access is often not given to an employee until after a period of probation.
The benefits for employers include the flexible contribution structures which can be adapted to suit budgets and staff needs. There is a wider choice of investment funds and retirement planning features. It is often a strong benefit in an Employee Benefits Package which can help with staff recruitment and retention.
Again, there are two main considerations:
- An employer will need to be more involved with the management of the scheme, in particular in the setup of it.
- It is necessary for the employer to ensure the scheme meets regulatory requirements.
So, what’s right for your business?
While Auto Enrolment is a welcomed development for the Irish pension landscape, it may not be the right fit for all employers. In many cases, where businesses already provide a group pension option to employees, it would mean managing two separate schemes. This could become cumbersome and costly for any business.
Many businesses already choose to run their own group schemes. These can be easily adapted to meet the new requirements. All eligible staff can then be enrolled in the existing company scheme. And while Auto Enrolment will provide a simple, compliant safety net, starting a new group scheme may offer a more attractive, flexible package for your employees.
What next?
At Life Goals, we’d be delighted to help you to explore the pension choices. We’ll look at the costs, tax benefits, and setup process for each option. We can guide you through the details and help you decide which works best for your business. Financial planning isn’t about products. It’s about you and working with you to create and maintain your financial plans, making sure everything works together to meet your needs and goals, whether they are personal or business. Just get in touch if you’re ready to connect!