As an employer you can play a central role in supporting the financial wellbeing of your employees. With Pension Awareness Day this September, we highlight six reasons why your employees should be engaging with their workplace pensions.
Maximise their workplace pension to claim all the money they’ve earned
A pension can be a great, tax-efficient way to save. Since auto enrolment, over 9.5 million people in the UK have joined one. Take time to help them understand that they benefit from your contributions into their pension. It is worth them understanding the value of those contributions as it is a great benefit and can differentiate you from other competitors.
Getting into the saving habit couldn’t be simpler
Once your employees are enrolled into their workplace pension it is easier for them to stay in the habit of saving because payments come straight from their salary.
Upping pension contributions even just a little could make a big difference to their pension pot in the long run.
If you can encourage your employees to take little extra steps, it will be increasingly unlikely that they need to rely on the State Pension to provide the lifestyle they would like for their retirement.
Tax relief can be their pension’s secret weapon
Having a big impact on their future prosperity may not take as much out of their pocket today as they might expect because they get tax breaks on their payments that they make into their pension.
It is worth spending time with your employees to help them understand the impact of the tax relief on their pension. These are normally at the highest rate of income tax that they pay. This means that saving £100 into their pension pot only normally costs them £80 – or just £60 if they are a higher tax payer (higher rate or additional rate taxpayers may need to claim back anything above the basic rate direct from HMRC). The figures are slightly different for Scottish residents because income tax rates in Scotland differ from the rates in the rest of the UK.
Your employees can find more details on our maximising pension tax breaks page.
Pension freedoms give more choices
When they eventually come to take their life savings – currently from the age of 55 – recent pension freedoms mean that they may have more choice and flexibility. It’s up to them when and how they take their money.
They can find out more about their pension freedoms by visiting The Pensions Advisory Service.
Pass on savings to loved ones – sometimes tax free
Pension savings can pass to their children or other loved ones, sometimes tax free, and usually without paying inheritance tax (IHT) as pensions aren’t usually included in their estate.
Your employees can find out more about passing pensions on from Pensionwise.
Give their money the chance to grow
The great thing about your pension is that the money your employees are putting aside for
their future is invested and will have the opportunity to grow.
When it comes to choosing and reviewing their investments they’ll need to think carefully about how involved they would like to be and how much risk they want to take, among other things.
As their employer you want them to secure a comfortable retirement, so it’s important to keep pensions, the benefits and the risks, at the forefront of your employee’s minds.
Delivering positive engagement techniques can help your employees understand the importance of saving for their retirement. Standard Life has had considerable success with member engagement and would be happy to support you.
For more information on engaging with your employees and their pensions why not have a look at these blogs?