Life expectancy has increased significantly while State benefits have reduced over the years and it is generally now regarded as an important component of any employment package.
The appropriate design and successful implementation of suitable pension provision does, however, require careful thought and planning. All too often, ill-conceived or poorly implemented arrangements can end up having a negative rather than the intended positive impact and it is therefore vital that due thought is given to establish a suitable pension scheme for your specific circumstances.
With the right planning and advice, it is relatively easy to establish a pension scheme that not only meets the needs of both the employer and employees but does so in an efficient and cost effective manner. A well-designed and effectively run pension scheme does not need to be expensive and can bring significant benefits to the company.
Careful consideration should be given to the following areas:
• Cost – How much do you wish to commit to pension provision for employees?Remember that the costs are ongoing and will grow with the number of employees and payroll. There may also be additional costs at outset that are required to establish the scheme.
• Employee contribution – How much do you want employees to contribute towards their own pension provision?This will not only help to reduce company costs but will also promote greater understanding of the scheme and wider appreciation of the company’s commitment.
• Control/involvement – How much direct involvement do you wish to have in the scheme in the future?Some employers prefer to pass as much of the responsibility for running the scheme to the providers while others prefer to retain much more control over how the scheme operates. There are numerous advantages and disadvantages on either side and it is important that the company consider these carefully before deciding on the best solution for its own circumstances.
• Provider – Which providers should be used for the administrative and investment services required for the scheme?Advice will need to be obtained from suitable advisers on the most appropriate providers for the administration services, which the scheme will require, and the range of investment options for employees.
• Additional Benefits – Should additional benefits be provided?Life cover can often be provided relatively cheaply for a group of employees, offering an immediate and significant benefit to both themselves and their dependents. This can be a useful and attractive addition to the pension scheme and a company should consider how attractive this is likely to be to employees.
• Communication – How should the scheme be communicated to employees?Effective communication is key to employees understanding how the scheme will operate and the benefits it provides. If the company is sponsoring the scheme, it is important that it’s contribution is visible to employees and that they appreciate the company’s involvement.
*David Gascoigne is a consultant from Trigon Pensions, which is an independent and specialist corporate pension consultancy with scheme administrators based in Bristol and Redditch.
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