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Rules of Attraction

Have you ever noticed how someone smells amazing to you, but others can’t smell it? That’s human pheromones at work. We’re attracted to certain pheromones, and others tell us to run for the hills.

How do we amend our business pheromones to attract talented employees and keep them around? Wine them, dine them, shower them with compliments… No, wait. That sounds like a sexual harassment suit waiting to happen!

Two words: Pension Scheme.

As a native Canadian I find group pension schemes a rarity here in Ireland. Unless the company is (a) well endowed (I mean like, BIG) or (b) has North American routes. In North America a group scheme is the norm. You simply can’t be in business without one.

And why not? A group scheme is an incredibly tax efficient way to attract employees. It is also a great way to promote you as a good employer. Group schemes are easy to set up and can be managed by a broker and independent trustees, which reduces (if not eliminates) your liability.

Here is a crash course for employers on pension schemes: You legally must offer one.

Your choices are: PRSA (Personal Retirement Savings Account) or Group Scheme.

PRSA:

Employee can access and contribute if they want, but the employer does not have to contribute.

No trustee involvement so the employee’s personal contributions are not protected in the event the underlying investment company goes under.

Can be set up by a broker, generally for free.

Group Scheme (the more attractive route)

Contributions & investment decided by the employee, but done at source by payroll.

Held in “trust” requiring a Internal (director or employee) or external (third party) Trustee. Third parties are generally provided by your broker/ life company

Employer must make a “reasonable contribution” which means:

i. Contribute 10% of what the employee contributes, to that employees pension plan

ii. Pay for cost of running additional benefit(s) to the scheme such as a death in service or income protection, both generally very reasonably priced.

iii. Combination of the above

Investment choice provided by the Trustee / Broker / Life company

You can add on death in service benefits, generally 4 x salary

You can add on income protection benefits in the event an employee is out due to illness/health

You can see that there is very little cost to you, as an employer, to offer a Group Pension to your employees.

EXAMPLE: GROUP PENSION CONTRIBUTION

Mr. Smelly is on the higher rate of tax and wants to contribute €300 per month to his pension.

Payroll contributes from source for Mr Smelly, which looks like this:

1. €330 total gets paid to the pension provider

2. €300 from the employee, actually only €180 as they get tax relief at 40% (clawing back €120 of tax otherwise paid to Revenue)

3. €30 (10%) from the employer only costs €26.25 when you take into account the corporation tax otherwise paid of 12.5%

4.Over the year this costs the employer only an additional €315

Still unsure, but know you have to set up a Group PRSA anyway? Talk to Progressive Financial Services today for a free consult. At the end of the meeting you can tick off one of your many tasks on your employer to do list. info@progressivefs.ie 01 901 5582

Progressive Financial Services is an independent financial advisory firm providing SME’s and individuals financial advice. Our core focus is on pensions, and business protection. We provide critical tax planning advise for estate inheritance or succession planning for your business. We can also provide advice on personal life cover, mortgages, and savings.

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