You may wish to offer a pension scheme as a benefit for your employees. It can help with staff retention and will give your staff the impetus to save for their retirement in addition to their state pension.

What is a pension?

In simple terms a pension is a pot of accumulated savings invested over many years that produces a regular payment for beneficiaries once they have left employment and reached a pre-determined age. The accumulated funds are invested in stocks and property by pensions specialists to accumulate growth. Often a pension can continue after the death of an individual to povide support for their spouse or children.

Types of pension

Occupational pension schemes - these are private pension schemes run by some employers and are also known as a works pension, company pension or superannuation. These schemes have traditionally been the most common form of pension but have declined in popularity with employers in recent years as investment returns have dwindled and pension deficits have emerged. A number of high profile cases recently have highlighted the fact that company pension schemes can collapse leaving eligible pensioners on reduced incomes.

Money purchase pension schemes - contributions made by you and your employer are invested in the stock market. However, share prices can fall as well as rise, so if the stock market takes a turn for the worse, your pension may fall in value. Especially concerning in the current economic climate with share values plummeting.

Personal pensions - a personal pension is a private pension that receives certain tax advantages. Staff can take out a personal pension under a contract with a pension provider and contribute to it themselves, and you can contribute as an employer too. This type of pension is portable - if an employee leaves for another job the pension moves with them.

Stakeholder pensions - are a type of personal pension. If you don't provide an occupational pension scheme for your staff, you may be required by law to offer them access to a stakeholder pension. According to The Pension Service, there are a few exceptions to this. For example, if you:

• Employ fewer than five people
• Offer all employees aged 18 or over a personal pension scheme through which you contribute an amount equal to at least three per cent of the employees' basic pay.