Emplyers contributions.. free money.. rubbish.

dunstonh

A good friend of mine owns a medium sized Bus and Coach operator and he was telling me his situation at the moment. He has an amount that he can allocate for his employees annual pay review. How that money is split, whether on a higher % pay rise, or a higher overtime rate, or a better benefit package is up to the employees to negotiate, but the total package will be the same whatever they decide. That is the reality of the situation, not just in small businesses but everywhere

It doesnt always work that way. We recently set up a group scheme for an employer after making them aware of the NPSS. We suggested they budget for it by doing 1% a year increasing at 1% until he hit the NPSS minimums. That way he didnt have to take the full hit in 2012 in one go. They came back and agreed to do 3% straight away. That is free money although I suspect pay rises for the next few years may be a bit lower to compensate.

A new employee in three years time though wont know any difference and currently a pension contribution from the employer is free money compared to another employer who doesnt offer it but pays the same wage.

It really doesnt matter how you word it at corporate level. Failure to use the money the employer gives you is a waste. If it takes wording like "free money" to get people to realise that not using it is stupid then I have no problem with that at all.

LittleVoice

dunstonh wrote: »

. . .although I suspect pay rises for the next few years may be a bit lower to compensate.

Exactly the point.

jamesd

Retired I.F.A., interesting since my employer just delivered a new contract with a clause having a unilateral right to withdraw all benefits, from pension to insurance. More details of that ruling and the interaction between the ruling and contract terms would be interesting.

jamesd

dunstonh, you probably also set up the pension with low AMC. The one at work is insane: many higher tax rate employees get bonuses, the internal fund AMC is 1.5% and the employer won't pay bonuses to any pension other than the one their IFA handles. So higher rate employees have an incentive to take the bonus as salary, pay the 1% employee NI, cost the employer the full employer NI and gain from putting the money into their own personal pension within a year or two. The bonus money NI being thrown away may well be enough to pay for the whole employee benefit package...

dunstonh

LittleVoice wrote: »

Exactly the point.

Ok, so picture this....

Mr and Mrs "work hard all day" who are seeing an adviser at night to discuss their retirement provision. They don't have the interest in the subject, they are tired and bored.

Do you:
A) explain to them the mechanics behind the employers contribution and how its really not free money but the employer is in reality paying you less which then confuses the hell out them, puts them off the whole idea.
or
position it as free money from the employer that they should use up as that is money they wouldn't get if they did their own thing. (therefore no money or free money).

The average consumer is thick when it comes to money. We see that on here all the time. There is little or no teaching of it at school and there is little inclination to learn about it either later on. Its a boring subject to the majority. Just because many of us here know a bit more about it technically, doesn't mean we have to force that on everyone.

You need to find the balance between being technical and over simplifying it. If the term "free money" encourages a non joiner to join the scheme then I am all for it and will make no apologies for using that term.

purch

If the term "free money" encourages a non joiner to join the scheme then I am all for it and will make no apologies for using that term.

....we can't argue with that now can we ?

cyclonebri1

dunstonh wrote: »

Ok, so picture this....

Mr and Mrs "work hard all day" who are seeing an adviser at night to discuss their retirement provision. They don't have the interest in the subject, they are tired and bored.

Do you:
A) explain to them the mechanics behind the employers contribution and how its really not free money but the employer is in reality paying you less which then confuses the hell out them, puts them off the whole idea.
or
position it as free money from the employer that they should use up as that is money they wouldn't get if they did their own thing. (therefore no money or free money).

The average consumer is thick when it comes to money. We see that on here all the time. There is little or no teaching of it at school and there is little inclination to learn about it either later on. Its a boring subject to the majority. Just because many of us here know a bit more about it technically, doesn't mean we have to force that on everyone.

You need to find the balance between being technical and over simplifying it. If the term "free money" encourages a non joiner to join the scheme then I am all for it and will make no apologies for using that term.

Oi, careful we are allowed to say that, you're not:rotfl: :rotfl: :rotfl: :rotfl:
True though

Retired_I.F.A.

wouldn't it be far better, truthful and just as effective in joe publics mind to say "effectively free money" ?

Probably better in Joe publics mind actually as even the thickest of us are suspect of any "free money offers."