RETIREMENT PLANNING FOR COMPANIES
If you are thinking of starting a new pension scheme for your employees or senior staff, there are a number of different plans available and choosing the one which is best for you and your company is important.

You need to decide:

	Which members of staff are to be included
	Whether they should make a contribution to their pensions
	If so, then how much that should be
	Should you, as the employer, pay into the plan and again, how much
	When should employees be eligible to join this scheme

Some of these decisions are controlled by:

	Your budget
	Your wish to attract and retain high quality employees
	What is being offered by your competitors
	Legislation and its impact on you and your business

To help you decide, the main types of pensions are described below

Final Salary / Occupational Pension Schemes
The costs and regulations associated with these plans mean that they are only suitable for employers with a large workforce. They guarantee a specific pension at retirement, based on your employee’s years of service, salary and their age. These are probably more attractive to long term employees who expect to stay with you for a number of years.

The arrangements are not flexible and may not be of such interest to your younger employees who expect to change jobs frequently and therefore prefer to be able to easily transfer their pension between employers. However, if your employees are more mature, then they will like the security of knowing that their pension is guaranteed.

Group Personal Pension
This pension is flexible, as you provide an individual pension in each employee’s own name, within a group scheme. These have the advantage of lower charges and the ability for your staff to choose the fund in which they wish to invest and their retirement age. They are able to transfer the plan to a new employer if they leave your service, without penalty or continue making their own payments if they wish.

The amount of pension they receive at retirement depends on the value of the fund at that time, based on the size of the contributions and how long the plan has been in force.

At retirement it is necessary to buy an annuity and rates vary according to age, sex and the type of pension required.

Executive Pensions
These are usually arranged for directors and senior employees. Larger payments can be made than would be available with a personal pension, although care needs to be taken closer to retirement to ensure that the salary which has been paid is sufficient to provide the pension which is required.

The maximum pension under current Inland Revenue rules is two thirds of the employee’s final salary. The pension received depends on the value of the fund, salary, years of service, age and annuity rates.

Small Self Administered Schemes
This type of plan is suitable for businesses who wish to control the investment of their money being used for pension provision. These pensions are often used for the purchase of commercial property and can provide a tax efficient method of funding the development of your business. They are provided for directors and senior staff.

Part of the arrangement can be insured within an Executive Pension Plan and the balance invested by the pension trustees. Like an Executive Plan, the actual pension received at retirement is based on the value of the fund, years of service, age and annuity rates.

Self Invested Personal Pension
This is a personal pension, which can be used for the purchase of commercial property. It has the additional facility to invest part of your funds within specific arrangements specified by the Inland Revenue.

The pension which you receive at retirement is based on the value of the fund, your age and annuity rates.

Stakeholder Pensions
This is a pension being introduced by the Government and it will be compulsory for all employers with a workforce of five or more employees to provide access to a Stakeholder Scheme by October 2001.

There are exemptions and these are:

	If you have an occupational pension in force, which is available to all employees, including part-timers after three months service
	An existing group personal pension for which all employees are eligible within three months of joining your company
	Employees whose earnings are below the National Insurance lower earnings limit, currently £9,000.

To qualify the pension must have:

	A charging structure that meets the Government criteria set out for Stakeholder plans or the employer must make a contribution of not less than 3% of earnings
	Where these criteria are not met, the employer has the option of:
	Altering the terms of the existing scheme
	Designating a Stakeholder pension scheme to run in parallel to the existing scheme
	Cross-subsidising the charges made for the pension scheme to bring them to within the permitted maximum charges allowed by Stakeholder plans.

The above comments are based on consultation documents issued by the Government.

For more information on Stakeholder plans and how they effect you and your business, contact Morgan Cameron ILP Ltd. Also see our News section entitled Stakeholder Pensions – the facts.