Workplace savings schemes – could they be added on top of auto-enrolment pension plans?

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Pension savings can be collectively built in many modern offices courtesy of workplace pension schemes. These schemes will have money put into them from both employees and employers but recent research has revealed that workers may feel that the pension schemes alone don’t go far enough.

Cushon, the workplace savings provider, conducted a survey of 2,000 individuals and 1,000 HR managers.

This survey revealed that 72 percent of employees want their employers to have a workplace savings scheme in addition to a pension plan.

Interestingly, the findings highlighted that this is not falling on deaf ears, as employers are realising that they need to help their employees build up a level of financial resilience to protect themselves in the event of unexpected circumstances.

In light of the pandemic, 92 percent of employers would now consider setting up a workplace savings scheme in addition to a pension, where employees can contribute directly from their pay. Helping employees save and invest so they are better prepared to deal with unforeseen situations, such as coronavirus.

Steve Watson, the head of proposition at Cushon, provided the following comments along with the findings: “Money worries often come from a change in circumstances and it’s important to have a financial buffer to fall back on should the unexpected happen.

“The impact of coronavirus on jobs and businesses has already been significant and it’s shown us that having a level of financial resilience is absolutely critical.

“It’s no surprise that so many employees are looking to their employers for support in times like these.

“Our research also found that 87 percent of employers say worries about finances have a negative effect on an employee’s performance at work, so it makes sense that healthy savings habits should be fostered through the workplace. “

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“Having a diverse workforce means that everyone’s financial priorities are different – they could be saving for their first home, managing debt or putting money away for retirement.

“Offering a workplace savings scheme, where employees can contribute directly from payroll, helps make the scheme accessible to everyone, no matter their age, earnings and circumstance.”

Some may feel that introducing such a scheme may be impractical but Steve shares that: “We’ve seen a steady increase in companies offering workplace savings initiatives over the last five years as financial wellbeing creeps further up the corporate agenda.

“It’s a really great way of engaging employees of all ages and encouraging them to save for their short and long-term priorities and employers are recognising this.”

A workplace savings scheme could also have surprising benefits for those on high incomes.

The more a person receives in employment income the more likely they are to be caught out with tax charges and Steve detailed that a workplace scheme could help with this: “Many of our clients also choose to top up the savings pot with a contribution, much like they do with a pension scheme.

“It’s also beneficial for higher-earners who find themselves caught by the tapered annual allowance as it allows them to divert some of their contributions into a savings pot.”

Private pension contributions are tax-free up to certain limits.

The government detail that employees will usually pay tax is savings in pension pots go above:

  • 100 percent of the saver’s earnings in a year
  • £40,000 a year
  • £1,073,100 in a saver’s lifetime

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