Company pension schemes vary from one company to another. A company pension will fall into one of two general types a ‘salary related’ or ‘money purchase’ scheme.
Our advisers can help guide employers through their obligations and options, thus ensuring that they are meeting the relevant requirements. All employers meeting certain criteria are required to provide access to a workplace pension for their employees. The rules regarding company pension schemes and contribution levels are changing over the next few years, introducing concepts such as automatic enrolment and compulsory employer contributions.
We can provide advice at company level, ensuring that you have the most appropriate type of scheme and that it is held with the right provider. We can also provide advice to individual members on an ongoing basis regarding their individual pension entitlement and investment options.
We are also happy to provide a review service for employers with existing schemes, taking account of charges, investment options, flexibility and performance.
Salary related schemes
In a salary related scheme, the income received in retirement is based on an employee's salary and the number of years they have been in the scheme. There is no investment risk, or investment decisions for the individuals to take, as these are taken at scheme level by the company.
Money purchase scheme
A money purchase scheme is based on how much has been paid into the scheme and how well the underlying investments have performed. On retirement, your fund is used to provide your pension, usually by buying an annuity (a regular income for life). This type of scheme is increasingly common and requires the individual members to take on investment risks and decisions.
How are payments made?
Member contributions are usually deducted from salary through the payroll system, and sent to the pension scheme provider along with any employer contributions. Company pension schemes provide a valuable employee benefit and can act as a key staff retention tool, particularly if promoted to staff in the most advantageous way.
Contributions by both employers and employees are highly tax efficient. This can be further improved if employers offer a ‘salary sacrifice’ arrangement and we will be happy to discuss this with you.
Past performance is not a reliable indicator of future returns. You should be aware that the value of an investment can fall as well as rise and that investors may not get back the amount they invested.
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