Employers: is it time to Boost your Employee’s Pension? Here are 5 ways to help

Boost your Employee's Pension

Employee benefits have hit the spotlight in recent years. Market-leading employers have recognised the benefits of offering more than salary and bonus.

Whilst looking after staff’s physical and mental health has taken centre stage, a growing number of market-leading employers have turned their attention to their workplace pension. We have seen this trend in the technology sector, but the trend is spreading to all industries.

For employers seeking to attract and retain top talent, a focus on their company pension plan is a must. Gone are the days of treating the company pension as a tick-box exercise.

In this article, we explore five ways you can boost your employee’s company pension:

Upgrade to a better provider

Many new or high-growth companies set up their pension with a basic provider. This may have been to tick the box on pensions, or the company could not obtain terms from the mainstream providers. Changing to a better provider can lead to better service, lower fees, a more comprehensive investment choice and the ability to implement salary sacrifice or tiered contributions.

The new provider may be able to ‘pick up’ the existing scheme and transfer the current staff pension automatically. If the structure of the previous pension plan doesn’t allow this, the new provider may be able to provide a one-off transfer document. All employees need to do, is sign the document to transfer their old pension.

Salary Sacrifice

Often referred to as salary exchange, the employee can agree to a reduction in their salary or bonus equal to their pension contribution. In exchange, the employer then agrees to pay the total pension contributions.

Salary sacrifice can benefit both the employer and the employee. As an employer, you are effectively paying your employees a lower salary (the cost is the same, as the extra amount is contributed to their pension). However, employers save employers National Insurance.

Employers can go one step further by reimbursing their National Insurance saving to employees. Employers can choose to retain the saving or kick a percentage back to employees, up to 100%.

Employees save national insurance and income tax as they receive a lower salary.

Some consideration needs to be made for other salary-related benefits that could be reduced and the impact on mortgage borrowing. However, many benefits are based on pre-sacrificed salary, and many lenders consider pre-sacrificed salary now.

Tiered contributions

Tiered contributions allow employers to offer varying pension contributions depending on the seniority of their staff. For example, an employer may offer matched contributions in the following format:

C-Suite/Directors: Matched contributions up to 10% of salary

Managers: Matched contributions up to 8% of salary

Rest of staff: Matched contributions up to 6% of salary

This way, employers can reward senior staff without making blanket changes to their scheme. Additionally, this will help attract and retain essential team members.

Many of the basic providers do not offer tiered contributions. Therefore, switching providers may be necessary to implement this change

Improve the basis of your contributions

The contributions basis describes which of the employee’s earnings are used for calculating pension contributions. There are three options:

Qualifying Earnings: Only earnings between the lower and upper earnings limit, set by the government each year, are used. The lower earnings limit in the 2022/23 tax year is £6,240, with the upper earning limit being £50,270. Any earnings below or above these figures are not included in the calculations.

Pensionable Earnings: This is often referred to as the basic pay option, as pensionable earnings typically include basic pay/salary. Contributions on this basis are the most popular.

Total Earnings: A little less common but still used, total earnings will include salary, bonus, commission, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay. Other pay components can be included beyond this list.

Offer education and guidance to staff

As a company grows, the burden on HR departments can become overwhelming. A way to reduce pension queries from staff directed at HR is employing the services of experts in workplace pension schemes. At Engage Wealth Management, we provide educational seminars, 1-1 meetings and year-round access to a qualified financial adviser for high-level questions. For those staff that require more bespoke advice, for example, retirement planning, we can offer individually tailored advice separately. 

Your company pension plan is one element of your overall staff benefits package. However, the pension plan is often the least understood and most valuable long-term. Getting the company scheme right is essential.

At Engage Wealth Management, we provide support to employers and employees with all of the above points. When changing providers, we support employers and employees right through the transition to ensure a smooth handover. We offer ongoing support and advice to employers to ensure they meet their auto-enrolment duties. Employees benefit from seminars, 1-1 meetings, and bespoke financial advice when required.

Get in touch with our experts today:

[email protected]

01273 076587

*This blog is for information purposes only and should be relied upon for advice.*

About the author
Picture of Oliver McDonald
Oliver McDonald
Oliver is the managing director and independent financial adviser at Engage Wealth Management.
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