Hi everyone,
Has anyone any experience of providing cash rather than giving Pension Contributions? Our advisers suggest this could be an incentive to opt out of pensions and therefore against regulations, however I have seen recent news that Deloitte appear to be doing just this. I would be keen to hear of anyone's experience of allowing staff to take pension contributions as cash.
We allow higher earners to opt for cash, but only if they have either reached their Lifetime allowance; or have already contributed the minimum (inc employer contributions) of £4,000; and sign a waiver that they have reasonable belief that further contributions would exceed their annual allowance. We are reviewing to see if there is a simpler solution.
I have 2 angles on this. We do have a few senior people who may have LTA issues and we allow them to have cash instead of the pension contribution.
In addition for all our other colleagues we contractually enrol them when they start but if they wish to opt out they will receive the 9% contribution as cash.
There is some thought around changing this to no cash option to encourage people to save into pension but we haven’t progressed this yet.
As promised in my earlier reply, here is what our benefits advisors (Punter Southall Aspire) said about this:
Deloitte’s approach to pension contributions here is interesting. However, I suspect it is not as straightforward as the article makes it appear and will undoubtedly increase the level of ongoing benefit management administration. A minimum level of compliance with the AE regulations must be followed.
Clear and appropriate communication is vital so as not to appear to be encouraging as opt-out which would be in contravention of the Pensions Regulator’s legislation. This will certainly be one reason that Deloitte now intends to re-enrol annually, rather than every three years, to encourage a more frequent review of these decisions.
In some cases, employers are establishing ‘side-car’ savings options to sit alongside the company pension which include ISAs and LISAs. Typically, these are for redirection of contributions above the statutory minimum level of pension savings.
I have no doubt that there is merit in considering these options, especially given the pressures faced by people of different ages and incomes which may move immediate focus away from long-term savings. Fundamentally though, pension savings remains a core workplace benefit that serves a specific and necessary purpose.
Hi, as with most responses it is typical for this to be done for high earners and those near the LTA. However if you go above and beyond the minimum pension contributions prescribed by the pension regulator (8% of which 3% must be employer) than some employers are allowing employees to flex above and beyond this. So for instance If you contribute 10% if an employee puts in 5% then you make mak a decision that the additional % could be taken as cash, or even put into an ISA. Bera in mind that most schemes are salary sacrifice and if paying cash there would be a NI burden on the business and tax and NI for the the employee...