Options for financing your employees’ retirement

Stepping off the 9 to 5 treadmill can be surprisingly stressful for employees who don’t have a pension option in place to replace their income. Here are a few possible alternatives that may be open to your staff members when they retire.

Individual Savings Accounts (ISAs)

One big advantage of ISAs is that they are tax-free. This means that they are only taxed as part of someone’s income before the funds are invested in the ISA, so when cash is drawn out from the ISA, there won’t be tax to pay on it. The interest does not attract capital gains tax either.

Employer’s Save as you Earn Schemes

SAYE schemes offer employees a share option that allows them to have a stake in the company. Plan members will receive a tax-free bonus, together with the amount that they have saved. Alternatively, they could buy shares with an option of 20% discount as granted by the employer.

These schemes carry very little risk to the investor, so it’s well worth your employees getting involved if your company offers one.

Property equity

The last decade or so has seen a boom in property prices meaning that equity levels have risen dramatically in certain areas. If someone’s mortgage is paid off completely before they retire, they could sell the property for a good profit, downsize and invest the remaining money to be used as an income.

Long-term equity investments

Long-term investments can still be good earners, despite the crash of 2008. The annual return on equity investments has held steady at around 5%. Therefore, if someone invested £10,000 for 20 years, with compound interest the yield they would receive would be around £25,000. They would pay 18% Capital Gains tax, although there is an Annual Exempt Amount which is tax-free, and they can take up to £10,000 every year without tax.

In conclusion

These alternatives do offer excellent opportunities for a safe nest egg that someone could rely on for their retirement, but it’s a good idea to combine these with a pension too.

To help your employees understand their options for retirement, why not consider one of our courses?