Benefits of a Retirement Plan for your Employees

Whether you have a few employees, or a larger staff complement – providing financial security for their future is a wise choice. As an employer, you are uniquely positioned to play a positive role in your employees’ future financial stability. Offering retirement benefits is not only a good way to get your employees to start saving for retirement, but offers a range of benefits both for your company and your employees’ future financial success.

When you consider that employees’ retirement savings should represent the biggest financial asset they can hold, you have a duty to ensure the choices you make with regard to the funds in which their contributions will be invested are sound and will positively impact long-term financial results.

Clear and present benefits

An employer of choice: Offering retirement benefits will enhance your remuneration packages, and therefore build your image as an employer of choice. In addition, employees will be more encouraged to save for retirement through company plans because in essence, they won’t have to do anything as the entire process is handled by the company on their behalf.

Matching contributions: Employers can play a meaningful role in helping their workforce maximise their retirement savings outcomes. As the employer you can match your employee contributions at a percentage option of your choice. This encourages employees to stay as they become more and more invested in the value of their retirement scheme.

Recruitment and retention: In addition to being a retention tool, the offering also acts as a persuasive recruitment tool. Retirement plans can attract and keep experienced employees, which reduces having to constantly outlay new employee training costs.

Tax advantages: There will be some significant tax advantages for your business when you encourage retirement benefits for employees. Employer contributions are tax-deductible and assets in the plan grow tax-free. In addition, employees do not have to pay income tax within certain limits on the amounts contributed on their behalf until the pension is paid out to them. And their contributions reduce taxable income on salaries. A key advantage is that retirement assets can be carried from one employer to another.

Professional advice: Setting up and administering a plan can be time-consuming, complicated, and costly. Therefore you should seek professional assistance in making choices and setting up plans for your employees. Pension rules are complex, and the tax aspects of retirement plans can also be confusing. Umbrella funds are used by many employers to reduce the burden on them and to focus rather on their core business.

Fairness and rules: The plan must be established and maintained by the employer, with communications that cover all employees fairly. Some on higher salaries should not necessarily benefit from e.g better fund benefits, investments returns than the rest of the staff.

• Information: Regularly informing and educating your employees about the implications of retirement and the various schemes offered is crucial. Retirement is expensive whichever way you look at it, and however you plan. Your employees must be educated about their pensions – what they involve and why they are necessary. The cold facts are that you may need up to 80% of your current annual income to retire comfortably. Retirement plans allow now for investment for greater financial security when employees eventually retire.

Continually assess the effectiveness of your retirement fund

Benchmark reviews
Over the years things change – your company, product offerings, the market, the economy – and you may need to make changes to the retirement scheme choices. Factors that drove your original choices may no longer apply. Therefore, regular annual reviews can ensure your offering is still competitive and the best route to assisting employees reach retirement goals.

Keep abreast of costs
Question whether the costs you are paying represent value for money. Your provider should be able to provide you with a breakdown of all your fees. Look for an administrator that has a simple, transparent fee structure, or at the very least, discloses all the associated fees on your benefit statements or in an easy-to-access member guide. While this is very important, also keep in mind and monitor the investment returns earned.

Maintaining engagement and motivation
Information, accompanied by encouragement and engagement, should be an ongoing focus. With the advances in technology, there should be a wide range of tools that can assist your staff to make wise choices and changes during their investing journey. Easy, accessible information via interactive webinars, newsletters and videos are helpful in guiding employees along their investment journey to meet their goals.

Empfin Solutions – the team that keeps your team happy

We’re an Old Mutual franchise with our primary focus on the three main areas of concern in everybody’s financial planning:
Your Company Benefits – advising on, and servicing umbrella pension and provident funds.
Your Personal Financial Planning and Provision – Estate planning, Wealth Creation and Retirement Planning.
Your Assets – motor and household insurance.

Always striving to be a trusted partner in facilitating financial solutions for organisations and individuals, our dedicated team of fully accredited, experienced professionals have a passion for satisfying customer needs and providing a truly client-centric service.

Find out how you can benefit at: www.empfinsolutions.co.za