UK: Pensions - Do we need a scheme?

UK: Pensions - Do we need a scheme? - Think carefully about the pros and cons for your company.

Last Updated: 31 Aug 2010

Think carefully about the pros and cons for your company.

There is no minimum size that dictates whether a pension scheme is worthwhile. However, the type of scheme which is appropriate may well depend on the number and type of members (directors, employees, part-timers) together with the total contribution levels. It's worth going back to basics and asking why you want a pension scheme in the first place. Is it to offer tax planning for senior executives, to aid recruitment and retention of staff, to meet the legal terms of a take-over, or to meet your desire to provide employees with a decent pension?

Pension packages can be neither designed, nor implemented, in a vacuum.

They must be relevant to the needs of the business. They should fit in with the overall employee benefits package, be flexible enough not to act as a barrier to recruitment and be predicated on an understanding of the business' requirements. Contributions should be affordable and sustainable, but high enough to be valued by the members.

For a very small firm, with one or two employees, this might mean making a contribution to their personal pensions. But the more employees you have, the more likely it is that you will only want to contribute to one arrangement. Group personal pensions are the usual 'start up' pension nowadays, but there is still a strong argument for occupational schemes (including special schemes for directors/senior employees which can be effective with only one member) where they are appropriate. Even the final salary scheme, whose obituary has been published frequently in the last few years, will be the right answer for many companies of a size and type to value guaranteed benefits above certainty of contribution cost.

The important point, for any employer, is to make sure that the scheme they choose suits their requirements both now, and in the future.

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