Group Pension Plan
To provide financial security for employees in their retirement
The busy lives of today’s employees mean that many do not have the time to find an appropriate savings scheme to prepare for retirement. This is a key reason why many organizations now provide group pensions for employees although, as will be discussed, such schemes can be mutually beneficial to employees and to firms. A group pension scheme refers to the process of an employer receiving regular contributions from their employees wages which are entrusted to a pension provider to invest up until the time when the employee retires and can access the money they saved during their time with a firm. Employees can make further contributions should they so wish and this again creates a mutually beneficial situation where both the employee and the firm can improve their tax efficiency. The pension fund builds up using the firms contributions, any contributions your employees make, investment returns and tax relief. The aim is to provide financial security for employees in their retirement, however such schemes also provide many benefits for an organization as a whole.
- Enable the recruitment and retention of high quality employees – The current volatility of global economics has increased the importance of personal savings to people. Offering and contributing to a pension scheme is therefore an extremely enticing benefit to any high caliber employee.
- The financial benefits – Employer pension scheme contributions are tax deductible meaning that a firm can simultaneously reduce its operating costs whilst improving employee morale. On top of this, employees can also reclaim their personal contributions, however there may be a limit depending upon the firms native legal system.
- Enhance employee performance – A group pension plan can effectively provide an incentive by showing employees that the firm values their input and has recruited them for a long term career and not just a job. This is likely to increase employee commitment and thus improve organizational performance.