Workplace Pensions Final Stage – Do not down tools
The final increases to workplace pensions legislation is due in April 2019
In April this year, companies will have reached the final leg of the current workplace pension legislation. Depending on your Company scheme, as a minimum requirement, Companies will be required to increase their contributions from 2 to 3% and employees from 3 to 5%. CB Financial have been working hard with our clients to ensure they are fully prepared for this final stage, and most importantly, their employees are aware of the increase in contributions and its implications.
Workplace pension – Initial apprehension
Workplace pension legislation has proved to be a great success. It is a far cry from the initial negative press that surrounded the legislation. If I am to take myself back to 2012, the world had just come out the other side of the infamous financial crisis, and many Companies were concerned about the additional financial burden that workplace pensions were going to pose. Indeed, I remember one company owner storming out of a meeting with me, upon hearing about the company obligations. Up until then he had been totally oblivious as to what workplace pension legislation was about. It was an extremely uncomfortable and difficult bombshell to break.
An overall success
Aside from the negative press, I believed strongly back then, as I do now, that the legislation was a really important step forward in ensuring all individuals have some kind of provision in retirement. Many individuals have debated the pros and cons of the legislation; Shouldn’t it be down to the government to support individuals in retirement? What are we paying our taxes for? The proposed contributions are too high and will cripple the economy. The proposed contributions are too low and will not provide individuals with sufficient retirement provision. Whatever people’s view, the truth was individuals needed to have an environment where saving was automatic. I understand this is sometimes an unpopular opinion, but statistics show many individuals are quite apathetic regarding their personal savings. So, I believe the legislative step of automatically enrolling individuals into some kind of saving mechanism was a positive step and in truth had been deferred for too long by successive governments.
The figures support the success of the workplace pension legislation. Since 2012, individuals contributing to a pension is up from 47% to current figures of 73% and in contrast to the initial findings that stated around 33% of individuals would opt out of the legislation, opt outs are running at a low rate of around 9%.
An engagement opportunity missed by many
For us at CB Financial, workplace pension legislation represented something more than its primary purpose. It represented an amazing opportunity for companies to engage their employees. An opportunity for companies to explain the reasons behind workplace pension legislation, to discuss the importance of the legislation and to promote the investment that they would be making. Remember, for many companies, auto enrolment was the first time they would be paying into a pension for their employees. Whilst this was a legislative requirement, why not shout about the investment the company would be making for its employees?
Fortunately, the companies that we have worked with understood the importance of engaging their employees, but it is a shame that there are a good number of companies that wasted the opportunity to connect with their employees. Instead, they chose to treat auto enrolment purely as a payroll exercise. When pension and benefits are processed passively like this Companies are missing a vital opportunity to engage their employees. It is the difference between the perception of contributing because you have to and not because you want to. This in turn can have a negative effect on recruitment, retention, and productivity.
Post final leg – Don’t down tools
Because of the incremental increases in workplace pensions legislation since 2012, each increase has represented a fresh opportunity to engage employees. This has kept employers and employees engaged but as we enter the final leg of workplace pension, I believe companies are in danger of downing tools. This would be a mistake. A company not only has a duty to maintain its pension responsibilities, but also to ensure they are taking advantage of any new market developments. In addition they should take steps to ensure their employees are fully engaged.
To ensure you don’t get caught up in the trap of ‘downing tools’, CB Financial have provided a couple of areas for companies to address after the final stage of workplace pensions in April 2019.
Can your Company now secure a better pension for your employees?
When workplace pensions burst onto the scene, because of the high demand, the pension providers had limited resources. This meant providers had the pick of the crop and resulted in many Companies having limited options. Many companies were forced to go down the ‘low cost’ pension scheme route, selecting pension providers such as NEST, NOW Pensions or Peoples Pension. Whilst there is nothing wrong with these schemes, it’s fair to say if you are looking to attract key individuals to your company, a more comprehensive scheme with a mainstream provider may help your cause. This is for a range of reasons such as:
- History of performance
- Range of funds available for employees
- Quality of access to employees
- Engagement and Communication to employees
Many Companies now have over five years of contributions in
their scheme, and their circumstances may have improved. This may mean that you can secure a more
attractive scheme with better terms for your employees. Therefore, over the next 12 months, it may be
a good time to address this.
Are your employees engaged?
Now that most employees will be contributing to a pension, the next challenge is to ensure your employees are, and remain engaged. The first way to do this is to encourage them to register for online access to view their pension at any time. Sounds easy right? It should be, but unfortunately only 20% of individuals register to view their pension online. This lack of engagement and visibility is one of the reasons individuals often approach retirement and discover they’re not going to have enough money to live the lifestyle they want to live.
Contact us for an initial discussion
The above are just a couple of considerations for Companies to address, but there are many other areas.
If you would like a further discussion on how CB Financial can help you review your Workplace pensions and maximise employee engagement, please contact us at firstname.lastname@example.org or 01483 881111.