Occupational pensions are set up by an employer to provide their staff with access to a pension scheme. These fall into two categories: final salary schemes and money purchase schemes.
Final salary schemes
In this scheme your pension is tied to your salary. The amount is paid at retirement, depending on the employee’s current level of pay and the amount of time your business has been signed up to the scheme.
With fixed salary schemes, staff pay a fixed percentage of their salary each month into the scheme, alongside a contribution from the employer.
These schemes are becoming less common in relation to other types of workplace pensions.
Money purchase schemes
Money purchase, or defined contribution, schemes are a more common pension solution. These schemes, again, require staff to pay a set amount into the scheme from their salary. However, employers are not always required to do the same unless it is via automatic enrolment.
These pensions are invested, with the aim being, to increase the amount employees are entitled to when they retire. The pay out at retirement age is based on the amount of money paid in and how successful any investments have been.
Group personal pensions
Group personal pensions are an option for staff who are unable to be automatically enrolled onto a workplace pension.
As with the other pension options, staff pay into their pension based on a fixed amount from their salary. The contribution is then invested in order to generate additional funds for retirement.
Stakeholder pensions function in a similar way to group personal pensions.
Paying into this sort of pension allows more control over how funds are invested. However, if the scheme is being provided to staff by their employer the control will lie with them.
Contributions from an employer aren’t always necessary with this form of pension. It depends on the terms of the pension agreed between them and their staff.
How can FSB help with your workplace pensions?
Finding the right workplace pension for your business can be difficult, with such a range of choice. To help, FSB members have exclusive access to our Workplace Pensions service. This service was specially created to provide businesses with a fully compliant pension scheme that’s quick and simple to set up.
The service features:
- Ability to transfer pensions if an employee leaves your company
- Access to leading pension provider, Legal & General
- Access to online information, education and admin tools for you and your employees
- Allows you to set up your scheme for your auto enrolment staging date, but not start contributions until then
- Full support and guidance via our dedicated freephone helpline
To find out more about different types of workplace pensions, or how FSB can help you with your pension scheme, get in touch with a member of our team or visit our FSB Workplace Pensions page.