Is There A Future For Occupational Pensions, And How May They Change Essay

Is There A Future For Occupational Pensions, And How May They Change - Essay Example According to the study conducted occupational pensions and retirement are in tandem; an employer and his employees contribute to funds, which are in form of savings and are paid to the employee upon retirement. Therefore, it is wise to plan for one’s retirement and old age; here, pension benefits individuals once they have ceased receiving regular income. Pension plans are implemented by an employer, the government, insurance companies, or trade unions; however, the coverage of occupational pensions varies in different countries. Occupational pensions are compulsory in countries like Iceland, Norway, Finland, and Switzerland, and they cover approximately 80% of the working population; however, Iceland is rated the top with 82% coverage. In Britain, some employers may exclude some employees from occupational pensions, such as casuals or part-time employees. Needless to say, occupational pensions are viewed as compensation for the employees; however, â€Å"the eligibility for a n occupational pension can affect entitlement to the state benefits†. Different countries have different types of occupational pensions; these are determined by the laws governing pensions in these countries. The main type of occupational pensions include contributory pensions, which involves an employee having to part with some of his earnings for instance 5%-10% of the gross salary plus his employer’s contributions. According to Combat Poverty Agency, contributory pension scheme is accompanied by high benefits and tax relief. Non–contributory occupational pension schemes involve the employer’s contributions alone (Organization for Economic Co-operation and Development & Private Pensions and Insurance Unit, 2001, p.208). Open stakeholder scheme is the third category of occupational pension, whereby, the employer does not contribute towards this pension; however, the law requires that this plan be established in a firm that has more than five employees (pe nsion sorter, 2012). Moreover, the United Kingdom law on pensions does not require employers to contribute towards the Open stakeholder pension scheme (pension sorter, 2012). Merits of occupational pensions Occupational pensions are established by the employer with an aim of benefiting the employee, and therefore, they offer tax relief for both the employer and the employee’s contributions. Needless to say, employees benefit from the opportunity to plan for their old age and retirement. In addition, in case a member of the pension scheme passes on, his beneficiaries will benefit from the occupational pension benefits. Nevertheless, an occupational pension scheme can act as a motivating tool for employees; this is because they are aware that their future is secured by their employer, especially in a non- contributory pension. Organization for Economic Co-operation and Development (2003, p.64) argues that, an organization can use occupational pensions to amicably lay off old-ag ed employees. Such employees are entitled to pensions, which replace salaries. In addition, paying of pensions has proved to be less