5 Things Your Boss Should Know about Pensions

There are many things to check when creating a company pension scheme for employees.In Ireland, and many other countries, companies use pension schemes as a tool for improving employee engagement and attracting top talents who have long-term employment plans with your organisation.

Today, we here at Simon Shirley Advisors wanted to discuss five things about pensions that we thought that HR managers such as yourself may want your boss to know about pensions when they are structuring or restructuring the company’s pension scheme(s), particularly for businesses within Ireland.

#1: Employees Have Options

In Ireland, employers are not legally obligated to provide employees with occupational pension schemes. There is, as stated by the citizensinformation.ie website, “positive government encouragement” to provide an occupational pension scheme to employees, but there currently exists no obligation to provide one. Please note that if your company does not provide an occupational pension scheme, it will have to provide access to some other pension planning option.

Even though your company may provide an occupational pension scheme, employees do not have to partake of the company’s pension plan. Instead, these employees can choose to engage in a personal pension scheme (otherwise known as a Retirement Annuity Contract, or RAC).

While it is possible for employees to maintain both an occupational pension scheme and a personal pension scheme at the same time, they cannot contribute to both plans for the same job. For example, say that Albert were to join the company’s occupational pension scheme, and only had that one job. In this instance, he could only contribute to his occupational pension scheme. If Albert were to start a side job at another company or start his own business (assuming such employment doesn’t violate any standing non-compete agreements with your company), he could then start a personal pension scheme and contribute to it based on his earnings from the other work.

#2: Employers Have Options

Employees can choose to use the company pension plan, or a personal retirement savings account, but not both for the same job.After 2003, a new kind of pension scheme became available to employers in Ireland who did not wish to contribute to traditional occupational pension schemes. This scheme, called a Personal Retirement Savings Account, or PRSA, can be used to either replace or supplement occupational pension schemes.

The existence of this option helps to give your company more flexibility in pension planning for its employees.

#3: Equality of Access for Part-Time or Fixed-Term Employees

However, while the option of using PRSAs can increase your company’s flexibility in handling pension schemes, it is important for upper management to keep in mind that it is necessary to provide their part-time and fixed-term workers equal access to any schemes that full-time workers doing similar work have access to.

As stated in the Pensions Authority handbook on how pension schemes work, “The Protection of Employees (Part-Time Work) Act 2001 and the Protection of Employees (Fixed-Term Work) Act 2003 require that there is no discrimination between part-time and fixed-term employees and their comparable full-time counterparts.”

For example, say that you have two workers in a construction company, one full-time, one part-time. Both do the same kind of work, so if the full-time employee gets a pension plan, then the part-timer should also have access to that same plan.

There is an exception to this rule, however. If the part-timer works less than 20% of the hours the full-timer normally works, then that worker does not need to be given the same pension plan options that the full-time worker gets.

#4: Pension Scheme Structures

For most companies in Ireland, the pension scheme provided will be structured as a trust. The other option, which is called a statutory plan, is set up by the legislation to provide benefits to employees in public-sector or semi-state owned legal bodies. So, unless your company is a state-owned one, you will most likely be using the trust structure for your company’s pension schemes.

As stated in the Selecting Member Trustees Handbook on the Pensions Authority website, a trust is an arrangement wherein “money is set aside in a trust fund, which is separate from the employer’s business, to finance the benefits payable to scheme members and their dependants.” Under the trust structure, the money paid into the trust is considered the trust’s asset.

Trusts, when created, should be established to ensure that members and their eligible dependents will receive the benefits they are owed regardless of whether or not the establishing business remains in operation. This involves carefully selecting trustees to manage the pension scheme and invest its assets so that members of the trust can receive their benefits regardless of the company’s financial health.

In fact, appointing trustees is a critical part of ensuring that your company meets all of its obligations under the Pensions Act.

#5: What the Competition is offering, and what is Available

Ultimately, the choice to offer a company pension scheme is one of the many tools that your company can use to attract and retain top-notch talent. This is one reason why it is absolutely critical to do some market research and find out what your competitors are offering to their employees. With this kind of research, your company can formulate a plan that will be competitive and attractive without being wasteful.

Without such research, your company might offer a plan that is too insubstantial to serve well as a means of tempting great workers to switch to your company, or one that consumes far more resources than is necessary to get the job done.

For this kind of dedicated research into such a key employee benefit, it can be very helpful to use the services of an employee benefits advisor, someone who has detailed knowledge of the different pension schemes that are out there, and can help you create a plan that is both cost-effective and competitive.

Learn more about employee benefits such as pension schemes, healthcare, and more in our free guide to employee benefits at the link below.

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