Helping to bridge the pension savings gap – what are employers responsible for post auto-enrolment?

Pension Awareness Day (#PensionAwarenessDay, #PAD19) is coming up in September – the 15th to be precise. It’s a day in the calendar aiming to highlight the gap in retirement savings and promote the importance of saving for the future. As such we wanted to share our thoughts on how employers can use this campaign to talk to their staff about pension contributions and help them along the way…


If you have been an employer in the last decade, the phrase ‘auto-enrolment’ probably caused you stress and a bit of a headache. Then, of course, there is the additional cost towards pension contributions.


The purpose of auto-enrolling employees over the age of 22 into a pension scheme is to address the national problem of people under-saving for their retirement. A report by the Department of Work and Pensions (DWP) “Maintaining the Momentum” published in 2017 indicated that 38% of the working age population still weren’t saving enough for their retirement. That works out to be 12 million individuals, which is more than 1 in 3 of our employees.


April 2019 saw the final minimum contribution rate increases required by law. Employers are now required to contribute a minimum of 3% and the employee a minimum of 5%, taking the total minimum contribution to 8% of qualifying earnings.


The end of automatic contribution increases – now what?


The positive news is that according to DWP figures published in 2018, 10 million people have auto-enrolled into a pension scheme, with only 9% opting out from the process. It’s certainly a great start to encouraging everyone to save harder towards their retirement.

Sadly though, the fact is that the contributions are still not at a level which will provide an adequate standard of living in retirement.


Now that automatic increases to pension contributions have stopped, it is solely up to the employee to manage how much they save.


Although there are no legal requirements for employers to increase contributions or encourage staff to think about their retirement savings, there could be a moral obligation to continue to support staff on an ongoing basis.


Here’s some ideas you may wish to consider:

Annual reviews


If you have an annual pay review process, consider if you bring into discussion the opportunity for staff to use that salary increase towards an increased pension contribution. If your organisation offers performance related rewards, investigate if your staff would like to utilise any bonus as a contribution towards their pension.


Educate


Many find pensions and retirement planning a confusing process, and often don’t know where to turn to for advice. You could bring in a local Independent financial adviser to offer staff a complimentary review of their current retirement position, or maybe a talk on the various private pension options available.


With an increasing regulatory focus on ensuring that pension schemes deliver value for money for members, education could be a popular benefit to offer, as the market continues to go through an unprecedented period of change and consolidation.


Education for you, the employer, is important too. Pension schemes are a significant cost to a business therefore ensuring you get value for money too is a priority.

There has been a considerable shift of pension schemes registering as “Master Trusts” in terms of the Pensions Act 2017, which is an occupational scheme for multiple non-associated employers. Each employer is included in a separate section of the master trust arrangement meaning , that although governance and regulatory responsibilities sit with a Master Trust Trustee, the participating employers retain the ability to make decisions about contributions, investments, and benefits.


Incentivise


Consider how you could use increased pension contributions as an incentive or motivator to boost results. If you have a particularly ambitious growth goal, and you want to show your commitment to staff for the long term and reward their loyalty, this could be a great alternative to the annual or quarterly bonus (which staff could earn and then leave!)

The key message we want to get across here is that employers still have a role to play in helping bridge the retirement savings gap. It could be something that works well to retain good staff and puts you in the spotlight of being a great employer.


If you would like to discuss any of the ideas above in regard to your business and circumstances, call us on 01722 325833 or email hr@hjssolutions.co.uk - we can arrange a confidential conversation with one of our HR Consultants.


Unsure about working with an HR Consultant? Check out the blog: "Three Common Mistruths About Working With An HR Consultant."

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