Pension Compliance and Engagement
Since the 2012 introduction of automatic enrolment, around 10 million workers have started contributing to pensions, according to The Pensions Regulator (TPR).
The feared increase in opt-outs as a result of the latest contribution increases has not materialised – 9% is the opt-out rate according to the Department of Work and Pensions (DWP), virtually unchanged from 2018.
This is a great start, but the momentum must be maintained in order to continue the drive to sustainable and successful retirement planning. Proposed amendments to the legislation in future will further develop the auto-enrolment process to boost savings levels. These could include:
Removing the £10,000 earning threshold,
Reducing the eligible age to 18,
The ‘band earnings’ salary definition could be widened considerably or even removed.
Time will tell which amendments actually reach legislation. However, whilst positive, these do not solve the fundamental problem – people are not saving enough to give them a healthy income in retirement. It is widely acknowledged that the current 8% total is not enough.
Whilst future legislation is being considered, it is important that employers take stock of their existing pension arrangements on a regular basis. Not only does this help to ensure an employer is getting value for their considerable contribution investment into the scheme, it also helps ensure the pension scheme on offer to employees is as competitive as it can be. A competitive pension proposition is a key factor in determining retirement outcomes for scheme members.
Based on an average salary of £25,000 for 100 employees, an employer will be paying £75,000 per annum into a workplace pension scheme assuming an employer contribution of 3%. That is a huge investment and deserves a regular review to ensure a return on that investment. In what other parts of an organisation would an employer spend an amount equivalent to 3% of payroll without having a regular review process in place?
Employers also need to be considering:
Are my employees engaged with and understand the scheme they are in?
How important is your workplace pension as part of your employee benefits programme?
Am I confident that I have the appropriate audit processes in place to ensure compliance with the ongoing regulatory responsibilities?
Making sure your employees engage with, understand and value their scheme is key in helping your employees get on track for a comfortable retirement. If they are informed enough to understand their pension, they are well placed to assess their retirement provisions and help themselves boost savings where needed.
This is a major focus for employers of all shapes and sizes – the CBI/Scottish Widows Pensions Survey confirms that 93% of employers believe businesses should focus on improving employee engagement with existing scheme members to boost voluntary contributions.
Our experienced pension consultants have worked with many employers since auto-enrolment began, delivering targeted presentations, webinars and one-to-one discussions to employees. Better engagement and understanding will follow when an ongoing communication programme is introduced. This also leads to better return on investment for the employer.
Busy Bees Benefits can help by delivering bespoke educational sessions to your employees in a simple and engaging way, boosting your employee’s knowledge and helping you look after their long-term financial health.
We are happy to discuss our services at any time, feel free to get in touch to speak to one of our specialist pension consultants by calling 0330 333 9100.