The government’s workplace pension scheme has been somewhat of a success since it was introduced a few years ago. Automatic enrollment has meant many workers who previously weren’t saving for retirement now have some money set aside, with the incentive of employers matching contributions leading to many more opting in to the scheme.
Types Of Workplace Pensions
There are different types of workplace pension schemes, even within a nonprofit corporation, which many professionals may not be aware of. The different types of pension schemes may offer better benefits than another. As such, you should definitely learn further details about these different variations:
- Defined benefit pension schemes
- Defined contribution pension schemes
- Cash balance plans
Different pension plans provide businesses the opportunity to select the best fit for the business as well as its employees like you at the same time. Make sure to consider these options before you select a pension plan for your retirement.
Yet even with higher numbers of people signed up to workplace pension schemes than ever before, there are still fears that it may not be enough come retirement. Many people want to live a comfortable life in old age, without working past 60 or 65, and more than a workplace pension is required for this. In addition to sound personal finance practices, most employees will require more benefits.
Recent data has shown that the average combined contribution from employee and employer to workplace pensions in 2015 was just 4%. Despite increasing numbers of people enrolled in such schemes and economic changes, this signaled no increase in the average contribution.
Financial experts are claiming that such a low contribution amount will mean that by the time many people reach retirement they will not have enough to live as they’d expected on a workplace pension alone. Therefore, either increasing contributions or opening a personal pension with Bestinvest can improve the future situation.
Along with the low average contribution of just 4%, that figure also represents no increase on the years before. Considering inflation has been growing quicker in recent years, this means that if workers do not increase their contributions or seek additional savings options, they will struggle to get by come retirement. This could by why there is a rise in IRA recharacterization.
The general rule is that people should be contributing a percentage that is half their age to their pension each month. This should help tackle all the problems of factoring in inflation and any other problems that may crop up, so that enough is saved by the time you finish working for good.
Depending on your age, there could be time for a lot more changes to the workplace and other pensions by the time you retire. Resting solely on one is a bad idea, as the worst could happen and it all disappear. When employees have a certain future, the overall working environment of the company improves because their is stability for everyone.
Find alternative investments should anything go wrong with your workplace pension. This will provide you with a backup and additional security when saving towards your pension. Think about any extra options available to ensure you aren’t left out in the cold when it comes to taking your pension.
Image from http://www.damgoodpensions.com/blog/5-takeaways-scottish-widows-workplace-pensions-report-2014/