Pensions have traditionally been seen as the “jewel in the crown” of employee benefits but were temporarily dislodged after Covid-19, when flexible working topped many people’s employee benefits lists.
Now, two years on, our latest survey carried out with People Management Insights, showed that 900 out of 1,188 HR professionals put pensions back at the top of the pile.
Flexible working is still seen as an important feature but ranked lower by 893 HR professionals. Third was mental health and wellbeing on 882.
At a time when mortality became a more widely understood concept beyond actuarial tables and the virtues of planning for the unexpected have been brought into sharp focus, does this signal a new era in workplace pensions?
It would seem so. The fact HR teams
are selecting pensions as the most important employee benefit suggests firms are moving
on from dealing with a receding global
health crisis to planning for the future with
more confidence.
However, the remaining challenge for employers is how better to engage people with their pensions, particularly younger generations, and encourage them to save for their distant retirement when they are in the midst of a cost of living crisis.
Equally pressing is the need to support employees with retirement planning and
guidance to ensure they can retire well, avoid potential pension scams or being caught out by pension allowances and taxes. This is something that should ideally be done from the age of 55, and not given as last-minute advice close to pension age.
Unfortunately, our survey showed that half of companies (51 per cent) do nothing to support their staff and help them plan for life after work. While just under a third provide access to
some sort of guidance, only 12 per cent actually pay for it. In essence, ‘the Advice Gap’ remains a wide canyon.
Without any kind of guidance, it can be hard for employees to get the most from their pension pot. Whilst in principle, pensions are easy – an employee pays in, their employer pays in, the tax man pays in to build up a pot – there are very complex decisions to make for someone approaching retirement.
Increasingly employees are looking to their employer for help, our survey suggests that many HR professionals are not entirely happy with the support their organisation offers. Just under a third (31 per cent) were “somewhat happy” while 24 per cent were “somewhat unhappy” and a further 24 per cent “unsure”. With only 12 per cent “very happy”
This suggests a great deal of uncertainty over how to help employees at this key part of their working lives. Namely, how prepared they are for when work is done. But as with many things in life it often comes down to cost.
Not surprisingly in today’s difficult economic climate, nine in 10 employers said they would offer more assistance to their staff if it were free. A quarter said they would be willing to pay between £10 – £50 a year per employee; 17.7 per cent between £50 to £100 and 20.7 per cent £100 per member per year.
Around half of employers said cost is the biggest barrier when it comes to companies buying in additional pension support for employees, but if companies do have a small budget offering guidance as an optional extra or add-on can be a more effective approach.
A good starting point is to direct employees to the many free online tools available, such as pension calculators to work out how much they may have at retirement, as well as to comparison tools that can benchmark every annuity on the market. Check the government-backed Pension Wise service for impartial advice.
For companies lacking any budget, it won’t cost anything but can offer real value to employees planning for later life. If employees can benchmark every annuity clearly, they could make considerable savings during retirement. Last year, analysis from Just Group highlighted a 16 per cent gap in income between the worst and best paying annuities.
With pensions a priority once again for employees, addressing the advice gap is something firms can easily do, swiftly, painlessly and even free of charge, to boost retirement planning for employees, enhance employee benefits and drive forward the organisation.