Pension full? Ask your boss for a ‘Wisa’

The Daily Telegraph - Your Money - - MONEY -

Work­place Isas al­low em­ploy­ees to save di­rectly from their salary – and in­vest­ment costs can be halved, writes Sam Brod­beck

You may al­ready have a pension and an Isa – but do you have a Wisa? Fall­ing pension al­lowances and younger work­ers’ de­sire to get on the prop­erty lad­der have led an in­creas­ing num­ber of em­ploy­ers to of­fer work­place Isas or “Wisas” to their staff.

They work just like con­ven­tional Isas, where sav­ings and in­vest­ments grow free of cap­i­tal gains and in­come taxes. But there are added ben­e­fits: in­vest­ment charges can be much lower be­cause em­ploy­ers qual­ify for bulk dis­counts, and con­tri­bu­tions are de­ducted through pay­roll, so money is saved be­fore it can be spent.

Fig­ures are hard to come by, but a sur­vey in 2015 found roughly one in 10 of Bri­tain’s largest firms of­fered Isas to staff. Isa providers say the fig­ure is now ris­ing rapidly.

Har­riet Saun­ders be­gan to save into the work­place Isa of­fered by her em­ployer, en­ergy firm Ovo, soon af­ter her 30th birth­day.

“We are given the choice of spend­ing 4pc of our salary on ben­e­fits such as cy­cle to work schemes, med­i­cal in­sur­ance and, since last year, Isas,” she said. “I’m try­ing to buy my first flat so it was a no-brainer for me. It means I know I’m sav­ing a set amount of money each month – in my case £70 – into the Isa.”

Ms Saun­ders is leav­ing her Isa sav­ings in cash be­cause she may need them at short no­tice to fund a de­posit on a prop­erty, but stocks and shares ver­sions are also avail­able.

Halve your fees – and give your Isa a £10,000 boost

As­sum­ing all else is equal, the Isa should grow more quickly than it would in an Isa bought on the open mar­ket. This is be­cause Ovo em­ploy­ees get a 50pc fee dis­count, cut­ting an­nual charges to 0.4pc.

Neil Atkin­son of Thom­sons On­line Ben­e­fits, the con­sul­tancy that set up Ovo’s sav­ings scheme, said the lower fees could add thou­sands of pounds to the fi­nal value of an Isa.

He said: “For some­one who in­vests £300 a month over 20 years in a high-risk, high-re­turn in­vest­ment, the em­ployer scheme dis­count is likely to be worth be­tween £4,000 and £10,000, depend­ing on in­vest­ment per­for­mance.”

Nor­mally in­vest­ment choice will not be as great as that of­fered by on­line stock­bro­kers. In­stead staff are nudged to­wards ready-made port­fo­lios where in­vest­ments are se­lected on their be­half on the ba­sis of the level of risk they want to take. Mr Atkin­son said the num­ber of his clients of­fer­ing the Isas had dou­bled in the past year. “They are an at­trac­tive op­tion for em­ploy­ees at all stages of their ca­reer,” he said.

“High earn­ers, for ex­am­ple, who may be un­able to add more to their pen­sions pot, can di­vert their em­ployer’s con­tri­bu­tions to a work­place Isa. They’re also ideal for younger peo­ple sav­ing for pre­re­tire­ment life events such as home own­er­ship or par­ent­hood.”

The amount you can save into a pension while still ben­e­fit­ing from tax re­lief has tum­bled in re­cent years. Be­fore 2006 there was no limit at all. It reached £1.8m in 2010-11 be­fore fall­ing to £1m in 2016. It is now pegged to in­fla­tion but is still low enough to catch thou­sands of mid­dle-in­come work­ers such as nurses, po­lice of­fi­cers and firefighters.

As Tele­graph Money has re­ported be­fore, it is feared that fur­ther cuts to the al­lowance would lead to an ex­o­dus from vi­tal pub­lic ser­vices.

Work­place Isas can give staff an in­cen­tive to keep work­ing when there is no longer any scope to add to their pension, said Dar­ren Laverty of Se­cond­sight, an em­ployee ben­e­fits firm.

Mr Laverty added that em­ploy­ers were be­gin­ning to take no­tice of the link be­tween em­ploy­ees’ per­sonal fi­nances and their men­tal health. He said: “Firms are start­ing to look at the causes of men­tal health is­sues among their staff. It is thought that peo­ple in debt are twice as likely to de­velop se­ri­ous de­pres­sion as those not in fi­nan­cial dif­fi­culty.

“Em­ploy­ers are start­ing to no­tice that th­ese prob­lems are hit­ting their bot­tom line. Help­ing staff build up some emer­gency sav­ings used to be a ‘nice to do’, now I think it’s a ‘must do’.”

Tak­ing your money with you

To­day’s work­ers switch jobs far more fre­quently than in the past. Most work­place Isa providers al­low for­mer staff to con­tinue to con­trib­ute, via di­rect debit, and still ben­e­fit from any dis­counts.

Nor­mal Isa rules ap­ply. You can save £20,000 a year across the six dif­fer­ent types of Isa. But you can­not pay into more than one cash or stocks and shares Isa in the same tax year.

Har­riet Saun­ders is sav­ing £70 a month into her work­place Isa

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.