These perks fill pockets, but still we walk on by

A new series on benefits in the workplace starts with a look at pensions, death-in-service payouts and private medical insurance
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The Independent Online

If your boss offered you a huge pay rise for carrying on with the same job, you'd be mad to turn it down.

If your boss offered you a huge pay rise for carrying on with the same job, you'd be mad to turn it down.

But that's exactly what many workers are doing by failing to make the most of the benefits offered by their employers.

Aside from traditional add-ons such as pensions, company cars, death-in-service benefits and health insurance, many employees now receive free or discounted gym membership, deals on home computers, shopping vouchers and even pet insurance.

Company perks are generally held to be worth an extra 20 per cent of your salary, and while you may have to pay tax on some, it is usually cheaper to make the most of them rather than pay for the equivalent yourself.

"Benefits such as pensions and healthcare should be viewed positively by employees as a key part of their overall remuneration package," says Mike Fosberry from accountants Smith & Williamson.

The problem is, many staff have a poor understanding of the pensions and other benefits offered in their workplace. This is compounded by the failure of many employers to explain them properly or to stress the advantages of taking them up. Only 13 per cent of companies believe staff attach a high value to their benefits package, research from independent financial adviser (IFA) Origen has found.

"Many perks are misunderstood because of poor communication," says Caroline Anstee from Elements, an IFA network for women.

When asked, in a survey by the financial services provider Virgin Money, which were their preferred benefits, staff opted for the time-honoured pension and health insurance over gym membership, computers and vouchers. But while more than four out of five workers think a pension is the most important work-related benefit, only two in five employers now offer a pension scheme with company contributions to new staff, says Virgin's spokes-man, Jason Wyer-Smith.

"Employers are choosing to offer short-term bonuses and piecemeal cash incentives, as opposed to committing to a pension scheme," he adds.

This is evident in the demise of final-salary schemes. Here, the company takes responsibility for the investment; on retirement, employees are provided with an inflation-linked annual income for life, based on their salary and length of service.

Nearly half of such schemes are now closed to new members and, in their place, employers are introducing cheaper money-purchase schemes, where the investment risk is switched to the employee.

Workers in money-purchase plans build up a lump sum over the years and then buy an annual income, or annuity, with it when they retire. The problem is, employers contribute far less to this type of pension scheme - meaning that staff have to invest more to ensure a decent retirement.

But many workers are failing to contribute anywhere near enough to do this - a problem highlighted in the review of long-term savings currently being carried out by the Pensions Commission, chaired by Adair Turner.

Worse still, one in four British workers fail to join either of the company pension schemes outlined above, even though many employers contribute between 5 and 10 per cent of an employee's annual income on their behalf, according to the insurer Axa.

"If your employer offers you a contribution towards your pension, it should be seen as part of your salary package," stresses Ms Anstee at Elements.

"It's usually much more expensive to fund your own scheme [without company help]."

Despite the advantages of belonging to a good occupational plan, it's easy to overlook a pension as part of your pay package. If you think you're missing out, or are unsure of what your company benefits are, talk to your human resources department.

As an alternative to final salary and money purchase, you may find your employer offers a group personal pension or a stakeholder (the latter is a simple, flexible, low-cost pension carrying charges capped at 1.5 per cent).

Don't forget that a pension is one of the most tax-efficient ways to save for retirement. Depending on your age, you can set aside between 17.5 and 40 per cent of your salary a year, and you'll get tax relief on these contributions.

After pensions, the other main benefits on offer are life insurance - known as death-in-service - and private medical insurance.

"Life cover is usually up to four times salary, paid out to a named beneficiary," says Kevin Carr of the broker Lifesearch.

Employees who belong to medical insurance schemes - offered through providers such as Bupa - can receive private hospital treatment and out-patient consultations. Some companies allow family members to enjoy the same benefits. As with your pension, your employer will be able to negotiate a better deal than you could by yourself.

"The cost is often a fraction of the price you would face if you took out an individual healthcare plan," says Mr Fosberry at Smith & Williamson. But be aware that the value of premiums paid on private medical policies is taxable as a "benefit in kind".

Some companies operate "voluntary" benefits packages that let you pick the parts you want. This means you can opt out of life insurance, say, if you have no dependants.

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