A pension is an important part of any remuneration package but the huge impact it can have is often overlooked. It can be thought of as an add-on-extra rather than a crucial part of the offer. Maybe a company car or membership of a health club just sounds more exciting! However, there is no denying that a pension is going to have longer lasting consequences. As an employer, you will know you are obliged to provide a workplace pension for your employees since auto-enrolment was introduced but the full benefit of a pension is often still not fully appreciated by some members of staff.
Many employees simply not saving enough
In fact, recent research revealed that the UK is heading for a significant savings shortage, with over 77% of employees feeling they have no control over their pensions. (Hymans Robertson survey 2015). Although a pension is a hugely valuable benefit, it is one that many employees feel they just don’t really understand. Pensions and retirement may seem a long way off and things they can put off for the time being. Or they may be unsure where to go for advice or guidance.
Linked to this, many employees are simply not saving enough. In a survey of 2,000 employees, 64% had no idea what income they’d have on retirement, just a vague feeling that it wouldn’t be sufficient. The consequence of poor pension provision has real impact for the employee, meaning that in all likelihood they will have to work longer than they had anticipated. The research suggests over 33% employees would have to work past the age of sixty nine, with 44% having to work past State pension age. Some heads of HR even thought that the figure could be as high as 75% of their workforce.*
There has been much media coverage about the Pensions Freedoms and the fact that people now have access to their funds from the age of 55. However, many employers do not feel that the Government’s Pension Wise scheme gives enough support or puts employees in a position to make informed choices about what to do with their pension pots.
Providing a sense of control
A good way to differentiate yourself as an employer is to empower your employees by giving them a feeling of control and confidence in this important area of their financial planning. By helping them to understand the significance of their pension, you will be seen as a responsible employer. You can also play a key role in helping an individual make informed decisions about their future. If the right steps aren’t taken when it matters, it can make a major difference to the amount of income they receive in retirement. There are various ways to offer your employees this vital support and information, for example, by providing workplace based education, guidance and/or advice sessions. Online access to their account can also play a role in making them them feel more in control but it should always be just a part of any overall communication programme of regular updates.
Providing your employees with a pension is obviously of great benefit for the individual member of staff. But by encouraging people to be aware of retirement planning, you are also keeping your own workforce planning under control. This is key especially when linked to the high numbers of people expecting to work past State Pension Age. The implications for the recruitment of younger talent and the management of an aging workforce are significant. As an employer, you do need people to retire so that you can recruit new blood and provide career progression opportunities. If the older generation don’t retire, because they can’t afford to, then this can stall and potentially affect your productivity. As such allowing access to education, guidance and/or advice helps people to make achievable plans and allow the normal workforce planning flow to continue.
So make sure you’re helping your employees to realise the true potential of a pension, the most significant part of any employee benefit package.
[Source HR magazine https://www.hrmagazine.co.uk/article-details/pensions-why-it-pays-to-empower-your-employees]