Retirement Ben

Question 1

Factors to comfort when setting up contribution rates

Answer 1

Level of retirement benefits that the sponsor wants to target
the contribution rate on competitor schemes
Member preferences - considering how much the member would like to save
Any legal limited or tax deductibility thresholds

Question 2

Advantages of matching members contributions

Answer 2

It encourages members to save more for their retirement
It pays more to workers who want to save more. Savings behaviour can be correlated with other desirable worker attributes
It is an example of an incentive unrelated to tax. Therefore, it can be used to courage people who do not pay tax to save

Question 3

Disadvantages to matching members contribution

Answer 3

Some employees with lower incomes may face challenges to make significant contributions,
Increased payroll admin and costs

Question 4

Variety of options for member contributions

Answer 4

Fixed amount - average salary for population
Fixed as a % of pensionable salary
Age related or service related contribution scales
Member elected % of pensionable salary
Auto-escalating contribution rates

Question 5

Following need to be considered when offering a choice

Answer 5

The range of members contribution options
How often and when the contribution levels can be revised
Whether to provide an incentive for members contribute more
Ongoing monitoring to determine the likely future member choice
Admin complexity