Organizing a pension program for your business can seem like a daunting prospect, particularly as you need to meet the needs of both your business and your staff to ensure a satisfactory plan for all.
So how can you better understand and simplify the process in order to give the best solution possible?
To put it in the simplest way possible, a pension plan is put in place by an employer to ensure their employees receive payment packages even after retirement. Money is added to a fund by both the employer and employee (often automatically) each month, the combination of which forms the individuals’ retirement fund.
The percentage of money taken from the employees’ wages each month is dependent upon their annual salary, and factors such as how long they have been working for the company and their age. This money is then invested by the company on the individuals' behalf. The investment can be made into stocks or shares, which should appreciate in value over time, providing a retirement fund. After retirement the fund can be withdrawn as a lump sum or in a series of payments, much like annuities.
When creating a pension plan, taxes also need to be taken into account. For example, it could be better to tax the pension after retirement, rather than during employment when money is being put into the fund. Vesting – the amount of proceeds an employee is entitled to after leaving a company - is also an important consideration. Employees need to be aware of vesting timetables as issues surrounding this can determine whether they receive the full amount of their pension. Vesting can also impact whether the individual would leave the job even if they were fully vested.
With the responsibility of investing pension money falling on the employer’s shoulders, it is very important to put adequate thought into what stocks, shares or bonds to invest in, and what proportion to invest in various assets. Ensuring due diligence will keep workers happy, as it sees they are financially supported after leaving your establishment.
Retirement services firms can help to ensure businesses have the best or most suitable plan in place possible for employees. This can include doing all the research upfront before choosing a plan, evaluating various options and taking care of tax and vesting decisions. As well as helping with choosing a suitable investment plan and helping you to weigh up the options, pension plan companies can monitor the performance of your investments and offer ongoing advice. Particularly if an investment isn’t performing as well as planned, advice from experts on how to reinvest and inform employees on a delicate matter can reduce the impact.
These firms are well-versed in helping businesses in setting up their pension schemes, and their experience can prove invaluable when making complex decisions regarding fundamentally important issues for employees. With this responsibility off an employer’s shoulders, they can focus on other important business operations worry-free.