State and Company Pensions; what do they do, why are they important and how can talking to your employees benefit you as a business?
With Pension Awareness Week upon us, today’s blog looks at why a company pension scheme is important not only to your business, but also to your employees and how Spire HR can help you with your auto-enrolment requirements.
State of Mind
The first dip into pensions is often the State Pension and for your employees, it’s crucial they understand this is where part of their National Insurance (NI) Contributions, taken from their gross pay, are going to. For the last tax year finishing April 2023, the full State Pension entitlement is £185.15 a week subject to having at least 35 years on an NI record. There are several reasons an employee might have a gap in their NI contributions; they might have had a career break to look after children or an elderly relative, or a period of self-employment and lower earnings or simply a gap to pursue other things. It’s worth knowing that anyone can check their state pension entitlement here.
Whilst the weekly amount of £185.15 sounds like a lot of money, with the ever-rising cost of living – is it enough? In 2012 the Government phased in pension auto-enrolment, meaning that companies in the UK have a legal obligation to help their qualifying employees save for retirement in addition to their State Pension.
For an employer to enrol an employee into a scheme they must:
- Be classed as a worker
- aged between 22 and state pension age
- earn at least £10,000 per annum
- and usually work in the UK
With enrolment comes many benefits. For the employee, there are some tax relief savings on the contributions. The Employer also contributes into the scheme, compulsory contributions being 5% from the employee and 3% from the employer. However, some employers choose to contribute more than this as part of an enhanced employee benefit. In most automatic enrolment schemes, the employee will make contributions based on their total earnings between £6,240 and £50,270 a year before tax. As an employer, you can also offer a salary sacrifice option, a way to make their pension more tax-efficient.
As a business, setting up a pension scheme can often be a time-consuming job, but Spire HR specialise in setting up a compliant scheme, leaving you free to work on and in your business.
This auto-enrolment service can include providing template letters to be sent to your employees in accordance with up-to-date legislation, uploading monthly reports for you to view at a glance where you’re up to, and crucially acting as a liaison between your company and the pension provider.
Please note we are not financial/pension advisors and cannot provide advice on the type of pension scheme or investments.
Think Spire HR, automatically
Spire HR is your local, friendly, knowledgeable outsourced HR team. We make ourselves an important part of your business. So why not get in touch with us today to see how you can reach new heights with Spire HR, either on fixed retainer fees or one-off fees.