With the average age of retirement increasing and people living longer, there's a growing need for better retirement plans. Startups need to step up to meet these worries with a range of retirement benefits for their teams — not least because it’s a draw for talent. “Contrary to popular belief, it's of interest to employees of all ages and not only those close to retirement age,” says Yssine Matola, VP of people at healthtech Semble.
Employees are more likely to stay with a company that offers generous retirement benefits, as it provides them with a stable financial future without having to rely on government pension plans, their children or the support of other family members.
In our Startup Life newsletter, Yssine gives her top tips for getting a retirement policy in place (note: this is not financial advice).
Make it a part of your overall benefits package
Alongside equity, things like learning budgets, parental leave, time off and health or life insurance ensure the attractiveness of your employer brand by thinking about your team’s future. It's usually on the lower-cost side thanks to cost-neutral options and capping mechanisms — for example, very high earners don’t get a crazy pension contribution from their employer, which keeps costs reasonable for the company.
Be compliant with national pension regulations
In the UK, you legally have to enrol almost all employees — those earning more than £10k a year and aged between 22 and the state pension age — into a pension scheme. The statutory contribution levels are 8% total (5% employee and 3% employer). It's then up to the employee to decide if they want to opt out or remain in the scheme. In some countries, like Spain or France, mandatory pension systems do not allow employees to opt out.
Offer more than the bare minimum
To be attractive to prospective employees and to retain talent, pension schemes are a good benefit to leverage. Benchmark retirement benefits in your industry so you can either match the standard or go beyond — just make sure you forecast your costs for team growth to ensure that the cost commitment is sustainable in the long run.
In the UK, some ways to enhance your pension offering are:
- Increase the employer contribution to an employee’s pension
- Offer matching contributions for employees who want to contribute more
- Offer access to a salary sacrifice plan. This means that the contribution amount is taken directly from an employee’s gross pay. This reduces both employer and employee national insurance contributions and how much an employee is taxed.
- Some employers give their savings back to employees as part of the employer contribution, increasing the total pension contribution — this makes it easier for an employee to sacrifice their salary and is a cost-neutral activity for the company.
Provide education around pensions
Don’t assume everyone understands how pensions work — especially those new to the workforce. Contributing into a pension not only helps save for retirement, it can also help optimise taxes — an aspect which could keep people enrolled in the scheme.
Provide retirement planning tools
More thanthree quarters of people putting money into a pension scheme don't know how much money they'll need when they retire. Give employees access to tools that can help them plan for retirement by providing them with information on their savings, investments and other factors. There are tools from traditional providers like Aviva and Hargreaves Lansdown, but there are also newer players like PensionBee and Grandhood.
How (and how not) to run a startup.
Bring in a financial adviser
Often, employees don’t know what to do with their salaries or assets. Providing access to a free financial adviser — whether that’s a digital solution or an in-person coach — can help employees make informed decisions about goals for retirement and how to reach them. It can also help them consolidate their pensions from other jobs and decide how to diversify their investments.
As the cost of living increases, some people may opt out of a pension scheme to increase their immediate take-home pay, which may not be the best option for them long-term. Having access to support can provide better financial awareness and forward planning.
Choose the right tools
Pensions can be pretty technical — contribution caps, auto-enrollment and salary exchange, for example — so take advice. As a startup, there is lots of help out there. You can use platforms like Husky Finance to help you manage auto-enrollment and ensure compliance, and brokers to select a company pension scheme that works for your budget, team size and more.
On the subject of... retirement policies
🛡️ Invest in benefits that provide forward-looking protections. Life insurance may sound like a morbid subject, but an increasing number of companies are beginning to offer it as a key perk. One from the archives by Miriam.
❓Will millennials ever retire? It looks likely that the majority of millennials will work until they’re about 70 and, even then, won’t have enough money saved to be able to retire.
🤝🏽 10 caretech startups to watch. The number of people globally over 80 will triple by 2050, and VCs are betting that tech can help patients get care and support carers. One from the Sifted archives.
🗓️ Betting on equity. The payout from a liquidation event can be an excellent retirement plan and not just for the C-suite — but it doesn’t always go to plan. You need to have a back up.
💰 Setting up pension schemes. In the UK, workplace pensions are a requirement — both the employer and the employee have to contribute to the pension. So what do you need to know to get it right? Barclays has put this useful guide together.