How to get the best pension for your employees
Offering a robust pension scheme is the foundation of a workplace value proposition, especially as employees increasingly look for employers who invest in their futures.
A well-designed scheme helps build financial security while reinforcing trust and engagement, helping your business retain top talent and boost morale. However, creating a plan that genuinely benefits your team requires careful thought and strategic decision-making.
Understand the types of pension schemes
To provide the best pension, start by understanding the various options available.
The historical option of the defined benefit pension scheme would offer employees a clear proposition, guaranteeing a specific retirement income based on factors like an employee’s salary and length of service. However, there are relatively few of these schemes still in existence and the majority of those that do are closed to both new entrants and future accrual of benefits.
Today, the vast majority of employers provide defined contribution schemes, where both employer and employee make contributions, and the final pension pot depends on investment performance.
Additionally, you may encounter various other forms of schemes, such as group personal pensions, stakeholder pensions or master trusts. Each has its advantages and trade-offs. To decide which one aligns with your goals, consider your workforce’s demographics and expectations.
Evaluate pension providers and their offerings
The type of pension you can offer to your employees may differ in terms of fees, investment options and service levels. Begin by identifying those who cater to businesses of your size and sector.
Compare investment fund choices carefully – are they offering low-cost index funds or high-growth options? Each fund type appeals to different priorities and offering a variety demonstrates that you’ve considered your employees’ diverse needs.
Equally important is the provider’s track record. Investigate its performance history, particularly how its funds weathered financial turbulence. Providers with consistent growth over time will give your workforce greater confidence.
Don’t neglect service standards, either. Accessible, clear communication and tools like online portals can make a real difference to employees’ engagement with their pensions.
Consider employer contribution levels
The level of your contribution speaks volumes about your commitment to your employees’ futures. While meeting the legal minimum is essential, going beyond it can set your organisation apart.
Higher contributions improve the final value of your employees’ pensions and can reduce the financial anxiety that distracts from productivity at work.
Before deciding on contribution rates, assess your company’s position and forecast growth. If an immediate increase feels unmanageable, consider committing to a phased approach, where contributions rise over time.
Matching contributions can also be an effective strategy. For example, matching up to a certain percentage incentivises employees to save more, knowing you’ll double their efforts.
Ensure compliance with legal requirements
Automatic enrolment laws require you to enrol all eligible employees into a workplace pension scheme and contribute at least the minimum percentage of their earnings.
To remain compliant, keep meticulous records of contributions and employee communications. Regularly review the scheme to ensure it aligns with updated laws and your workforce’s evolving needs. The Pensions Regulator offers detailed guidance, while consulting a specialist can help you navigate complexities.
Failing to comply risks penalties and reputational harm. More than that, though, providing a legally compliant pension reflects your integrity as an employer and demonstrates your respect for your employees’ financial well-being.