In the coming years, as we continue to age as a nation, the subject of pensions is going to become more and more prevalent. We’re already beginning to see cracks emerging in the form of the Government’s pension deficit, the Irish Independent reporting only last month that ‘Ireland’s semi-state’s are staring into a €3.6BN pensions shortfall’.
But it’s not just those working in the public sector that is concerned for its future financial security. The Global Benefits Attitudes Survey showed that almost a quarter (23%) of respondents are delaying their retirement until at least age 70, while more than half (52%) are cutting spending, to save for their future.
But where does this fit in with employers? Is it up to us to look after the future financial needs of our staff or is it their responsibility to ensure they save enough to live the life they want when they retire? With these questions in mind, we caught up with Joanne Smith, Senior Financial Planning Consultant at MoneyCoach.ie, to discuss our legal obligations and what businesses can do to support their staff.
Q. So just what pension obligations to employers have to their employees?
Joanne: Even if a company only employs one member of staff, they still have certain pension obligations to their employee/s. At a minimum employers must provide employees with access to a pension, this can be done by putting in place a company pension scheme, or facilitating access to a standard PRSA (personal retirement savings account).
Q. Does the employer have to contribute to employee’s pension scheme?
When setting up a company pension scheme, employers are obligated to make a ‘meaningful’ contribution to each member’s pension. A ‘meaningful contribution’ in widely deemed to be one of the following:
Q. What about a Standard PRSA?
Joanne: When giving employees access to Standard PRSA there is no obligation for the employer to contribute to the scheme, but they can if they want to. However, the following obligations on the employer do apply:
If an employer has a group pension scheme in place, but there are employees that are deemed ‘Excluded employees’ they will also need to fulfil the above PRSA requirements for their excluded employees. Excluded employees are defined by the Pensions Board as any of the following:
Going Beyond Our Obligations
As Joanne so rightly points out above, employers have a duty – a legal obligation in fact - to provide their staff with access to pension schemes and to promote these to their employees. But what if we went beyond doing the bare minimum? What if we took this requirement and turned it into a perk for our employees, thus building a greater sense of loyalty and value between employee and employer. Believe it or not, but it can be done quite easily, at little or no cost to you as an employer.
The simplest way to do this is to communicate with your employees; to educate them on the importance of saving for the future and to help them realise just how much they will need to save to achieve the standard of living they desire once they retire. Some businesses do this through interactive games; others through online portals that help workers build their confidence around pensions by learning, step-by-step, how they work. If all of this sounds like too much work, then there’s a third option: Providing your employees with access to an independent financial advisor. Like MoneyCoach.ie, many insurance brokers are happy to work with you as an employer, providing free consultation services and workshops for your employees.
The economy is showing strong signs of recovery and with that employee migration is on the rise. As business owners our main concern is retaining the very best talent we have. For most of us profit margins are still tight and so we must look at different ways to add value to our employees experience if we don’t want them to move to the competition. Making financial planning and pension support a perk should be a no brainer for any business person keen to keep his or her staff and attract new talent.
The contents of this article are necessarily expressed in broad terms and limited to general information rather than detailed analyses or legal advice. Specialist professional advice should always be obtained to address legal and other issues arising in specific contexts.
But it’s not just those working in the public sector that is concerned for its future financial security. The Global Benefits Attitudes Survey showed that almost a quarter (23%) of respondents are delaying their retirement until at least age 70, while more than half (52%) are cutting spending, to save for their future.
But where does this fit in with employers? Is it up to us to look after the future financial needs of our staff or is it their responsibility to ensure they save enough to live the life they want when they retire? With these questions in mind, we caught up with Joanne Smith, Senior Financial Planning Consultant at MoneyCoach.ie, to discuss our legal obligations and what businesses can do to support their staff.
Q. So just what pension obligations to employers have to their employees?
Joanne: Even if a company only employs one member of staff, they still have certain pension obligations to their employee/s. At a minimum employers must provide employees with access to a pension, this can be done by putting in place a company pension scheme, or facilitating access to a standard PRSA (personal retirement savings account).
Q. Does the employer have to contribute to employee’s pension scheme?
When setting up a company pension scheme, employers are obligated to make a ‘meaningful’ contribution to each member’s pension. A ‘meaningful contribution’ in widely deemed to be one of the following:
- Either the employer covering the costs of setting up the scheme and the ongoing operating costs of running the scheme, including covering the cost of death in service benefits
- Making a contribution into each members plan which is not less than 10% of the ordinary annual contributions, not including AVC’s, i.e. a minimum contribution of 10% of the value of the members ordinary contribution.
Q. What about a Standard PRSA?
Joanne: When giving employees access to Standard PRSA there is no obligation for the employer to contribute to the scheme, but they can if they want to. However, the following obligations on the employer do apply:
- The employer must appoint at least one standard PRSA provider
- They must notify employees that they have a right to contribute to a PRSA
- Allow the PRSA provider or Pension advisor reasonable access to employees at the place of work.
- Allow reasonable paid leave of absence to employees to set up a PRSA
- Make deductions from payroll when instructed by the employee and remit them to the PRSA provider.
- Advise employees in writing (normally on their payslip) at least once a month of their total contribution including the employer's contribution, if any.
If an employer has a group pension scheme in place, but there are employees that are deemed ‘Excluded employees’ they will also need to fulfil the above PRSA requirements for their excluded employees. Excluded employees are defined by the Pensions Board as any of the following:
- An employee who is included in the scheme for death-in-service benefits only.
- Employees who are not eligible to join the scheme or will not become eligible to join the scheme within six months from the date they began work for the company.
- Employees who are included in a scheme that does not permit the payment of additional voluntary contributions (AVCs) by members.
Going Beyond Our Obligations
As Joanne so rightly points out above, employers have a duty – a legal obligation in fact - to provide their staff with access to pension schemes and to promote these to their employees. But what if we went beyond doing the bare minimum? What if we took this requirement and turned it into a perk for our employees, thus building a greater sense of loyalty and value between employee and employer. Believe it or not, but it can be done quite easily, at little or no cost to you as an employer.
The simplest way to do this is to communicate with your employees; to educate them on the importance of saving for the future and to help them realise just how much they will need to save to achieve the standard of living they desire once they retire. Some businesses do this through interactive games; others through online portals that help workers build their confidence around pensions by learning, step-by-step, how they work. If all of this sounds like too much work, then there’s a third option: Providing your employees with access to an independent financial advisor. Like MoneyCoach.ie, many insurance brokers are happy to work with you as an employer, providing free consultation services and workshops for your employees.
The economy is showing strong signs of recovery and with that employee migration is on the rise. As business owners our main concern is retaining the very best talent we have. For most of us profit margins are still tight and so we must look at different ways to add value to our employees experience if we don’t want them to move to the competition. Making financial planning and pension support a perk should be a no brainer for any business person keen to keep his or her staff and attract new talent.
The contents of this article are necessarily expressed in broad terms and limited to general information rather than detailed analyses or legal advice. Specialist professional advice should always be obtained to address legal and other issues arising in specific contexts.
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