How much will workplace pensions pay?
During your working life, either as an employer or employee, it’s wise to keep one eye on the future and think about what you will do once you stop working and retire. But, as well as securing your own future, you should do your best to help that of your staff too.
Pensions are a key way of saving for your and their retirement. Soon, all eligible employees will be required by law to sign up for a workplace pension. But how much does a workplace pension pay? And are there ways to increase the amount you and your staff can save?
How is pay calculated?
Workplace pensions are calculated based on contributions from you and your employees.
Based on pre-tax earnings, you pay a percentage amount each month and your employees do the same. Currently, this is 0.8% for an employee and 1% for the employer. However, the amount contributed by both sides will increase annually.
The amount paid will influence the amount staff have to draw from when they finally retire. This figure will also increase when the salary of an employee or employer increases.
It’s possible for staff to find out an estimate of what they stand to get at retirement through a pension projection. This can usually be provided via their pension provider.
How to save more
Pension contribution is one way of saving for the future. However, this isn’t limited to a minimum payment from employers and staff. It’s possible for employers to agree to contribute more as part of their pension provision.
This means that a pension pays in more and staff have more when they retire.
Salary sacrifice is a process where staff members can agree to attribute a portion of their salary, which is deducted from their pay and goes into their pension pot.
Both of these methods of saving mean that they take home less each month, but pay more towards their pension. However, this is not a decision to be taken lightly, and it should be discussed it with your staff before an agreement to increase deductions is made.
How can FSB help with pensions?
There are many elements to consider when it comes to providing a workplace pension. To help with this, FSB members have access to our Workplace Pensions service. This is specially designed to provide our members with a fully compliant pension scheme.
The service features:
- Access to leading pension provider, Legal & General
- One off set-up charge covering the set-up your pension scheme, including help and advice, starting at £399 plus VAT
- Full support and guidance through our dedicated freephone helpline
- Access to information, education and admin tools for you and your employees
- Ability to transfer pensions if an employee leaves your company
To find out more about how FSB can help you establish your pension scheme, get in touch with a member of our team or visit our FSB Workplace Pensions page.