South East Business Magazines Article – May 2008

When it comes to your minimum obligations as an employer if you have one employee or one hundred, be under no illusion but you must by law provide some form of access for your employees to a Pension. This is regardless of whether your employees are full time, part time, temporary contract or casual.

It has been highlighted lately and it has been made known that under the Pensions Act, the authorities have stated that they intend to clamp down on employers who have paid little or no heed to this law.

This does not mean that you must provide a fat pension contribution for each employee, it merely states that you must at least nominate a PRSA provider via your Financial Advisor or a Life Company who can provide information for your employees on PRSA’s as a minimum. You must then make your employee’s aware of who this provider is and how they can access that information. Finally, you must accommodate them if they wish to make payments by ‘Net’ Salary deduction.

Simply contact your Financial Advisor for further information if you have not done so already. Doubt not that this is the law and you can and will be prosecuted.

AND/OR

WHAT YOU CAN DO FOR YOUR EMPLOYEE…………….

Let’s get straight to it! The Pensions subject is a hot topic and will become increasingly so as Irelands population ages. In the late 80’s, our social geography teacher stating that Ireland had one of the youngest populations in Europe at that stage, with a very high percentage under 25. Whilst that sounded great and we might have envisaged the youth taking over the country, where are those people now? For a start we are all 20 years older and getting closer to retirement. The Government ‘State Pension Health Warning’ is very real, the money will not be there to give us any great State Pension benefit the way things are going, so people should stop banking on that.

As an employer you must do the minimum as outlined above, but why not take it a step further.

A good Group PRSA/Pension scheme has long been recognised as a very valuable asset for both an employer and its employees.

Benefits for the Employer:

• Enhances your reputation and respect as a good employer

• Staff feel more secure, valued and important

• Increased loyalty and commitment from staff

• Makes you more appealing from a recruitment point of view

• Staff retention is higher

• Employer contributions are completely off settable and tax efficient

The reality is that there is usually a stronger staff participation rate to a Group Pension/PRSA Scheme when an employer makes a contribution.

So what are employers options should they wish to take the Group option further? Firstly, decide which scheme suits your business best. Here are some of the comparisons between PRSA & Group Pension Schemes (see table)

Additional benefits can be added to a Group Pension Scheme such as Income Protection and Death in Service benefit, usually at very attractive group rates as opposed to an individual. A similar package can be arranged as a separate contract alongside a Group PRSA scheme.

*Under the Social Welfare and Pensions Act 2008 new regulations will affect existing and new Group Pension schemes putting new responsibilities on Employers, Trustees and Administrators. Therefore for smaller business’s the option of a Group PRSA scheme may prove more appealing in the future.

Don’t forget if you exclude certain employees until they have a minimum service. etc you must meet the minimum requirements as outlined for these employees.

In summary, Pensions may not be the coolest thing in the world but if you want to know the importance of a pension, ask somebody who is retired.

As a progressive employer, encourage and embrace the concept of pensions for the good of your business, employee’s future and for the future wealth of the country.

An experienced or novice investor could be easily confused about investing at present. The bottom line is to be true to yourself, your long term financial goal and your comfort with risk. Cash is King no doubt at present but don’t be afraid to invest in other asset classes if your investment sight is medium to long term. Equities are low at present and they may go even lower but if you are buying in on the ‘drip’ by means of a monthly savings plan or pension contribution you are buying units at varying levels as the market rises and falls.

Don’t forget the Golden rules……

1. Diversify – Choose funds/ investments that give you access to different asset classes, including equities, cash, property, commodities, currencies etc
2. Timing – Think Short, Medium & Long Term when investing. Don’t tie all your money up for the same term – that includes deposits options
3. Exposure – Don’t over expose your self to any one asset class, Fund Manager, Life Company or Financial Institution
4. Beware of Charges, Interest Rates on anything you invest in, be it a savings plan, pension or House Purchase

Should you buy your first home now? The big Question is – Do you need a house?

It’s a buyers market without a doubt but make sure you are getting max value Versus how much rent you will pay if you wait Versus a possible further house price drop, property is not meant to be a short term investment Versus the ever tightening credit vice grip and the actual amount of money the bank will actually lend you. Could all lenders drop to 80% loan to value for first time buyers? Finally make sure you can afford the repayments and a possible rate increase.

What people forget is that the majority of investments were not supposed to be short term, though we all know of the individuals who supposedly made ‘killings’ on a short hop. But it’s only now you are hearing of those who actually lost their shirt or blouse.

Finally don’t forget an investment strategy that can yield an excellent return. Invest in yourself, be it expanding your education or reinventing yourself in these difficult times.

Be positive in what ever move you make.

Contact Frances on 052 6129487 or email on foh@foh.ie for advice.