A pension scheme is a kind of savings fund and is a valuable benefit for any employee. Both the employee and the employer contribute to the fund as a type of investment which ensures the employee has an income once he or she retires from work.
1. What type of pension scheme should I offer?
The defined contribution pension is the most suitable scheme to offer as a small business. It is the employer’s responsibility to deduct contributions directly from the employee’s salary every month. Currently, the minimum employer contribution is 3% of salary but you can opt to pay a higher percentage as part of your employee benefits package.
2. Do I need to offer a pension scheme to employees?
If you deduct income tax and national insurance directly from your employee’s salary, you are classed as an employer and must provide a workplace pension scheme. A workplace pension scheme is in addition to the government provided state pension and more information on state pensions can be found here: https://www.gov.uk/new-state-pension.
3. Who can help with a small business pension scheme?
Your accountant can talk you through the steps you need to take to set up a small business pension scheme and assist with payroll queries. If you’re based in Cheltenham accountants in the town can offer advice on pensions, as well as general business advice and tax issues.
4. Are there any alternative retirement options?
Company pension schemes are the most popular option to save for retirement but there are other options available that you may wish to consider as a top-up:
Property: Selling property when you retire could provide you with a lump sum. There are risks involved as with any investment as you must rely on the property market.
Individual Savings Account: An ISA is a tax-free savings account, there is a limit, however, on how much can be paid in each year.
Before making any investment decisions, make sure you consult a qualified and regulated professional such as accountants Cheltenham.
5. What is auto-enrollment?
The government is trying to encourage more people to save for later life and to start saving as soon as possible – the younger the better. All employers, by law, must provide a pension scheme to their employees and employees are now automatically enrolled onto the scheme, unless they choose to opt-out.