Pensions having no impact on attraction or retention

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A 'quiet pension revolution' is taking place but businesses are struggling to engage employees

More than half (51%) of businesses believe that their current pension scheme provisions have had no impact on their ability to recruit or retain employees or on succession planning, according to new research by the CBI and Aegon.

The survey found that employees are poorly engaged with pensions, with two in five businesses saying their staff are not engaged, and just 12% saying they are happy with current levels of employee engagement around workplace pension schemes.

Age, salary and length of service were identified as key factors affecting individual employees' engagement. The research found that 36% of those aged 50 and over were very engaged with pension provisions, compared with just 6% of those aged 34 and under.

High-income workers were also found to be more engaged (87%) than low-income workers (33%). Length of service at an organisation also played a role, with 31% of new starters not very engaged compared with 22% of employees with more than 10 years’ experience.

This lack of engagement comes despite employers investing heavily in provisions; with 92% of firms contributing above the statutory minimum level for auto-enrolment schemes.

“Businesses are contributing billions to their workers’ pensions every year, playing their part in a quiet pensions revolution with auto-enrolment having a growing influence over workplace saving,” commented CBI managing director Neil Carberry.

“While many businesses rightly recognise the positive effect that their investment in pensions can have on recruiting and retaining staff, others need to open their eyes to grasp the opportunities in front of them.”

The research pointed to the benefits that increased employee engagement with pensions can bring, with 55% of firms citing that stronger engagement would improve their ability to either retain, recruit or carry out succession planning.

There are a number of steps, the report went on, that businesses can use to increase engagement. It found that 63% believe simpler language and minimising jargon in pension communications would help, while 54% think technology can be a valuable aid to communication and engagement.

“It comes down to three things,” said Carberry, speaking at a press roundtable outlining the research. “Pensions are a long-term vehicle and we need stability on this. The second point is employers need to show support for and talk positively about the defined contribution schemes to build confidence among workers. And the third is information. There is clearly work to do around the pensions dashboard and how the business can help with this.”

Also speaking at the roundtable,Aegon workplace investing managing director Paul Bucksey commented that the “most fertile time to engage” an employee is in the first few days of them joining the organisation.

He suggested that “even simple ideas like posters can help in sectors such as retail and warehousing”.

“What can really work well is tailoring the message to suit the employee,” he added. “How businesses communicate the information to a 30-year-old and a 50-year-old should be different; the older workforce is more engaged as they are in a position where they are thinking about falling back onto it sooner.”

Carberry agreed: “Pensions are a young person issue not an old person issue. We need to get the discussion right as it presents an opportunity to uplift productivity.”

But while the research showed that organisations are taking steps to engage employees – with 63% including pensions in an employee’s induction process and 49% delivering in-house webinars or seminars – Carberry and Bucksey agreed that the level of communication between employer and employee on the topic varies considerably between businesses.

“Some HR functions fear giving advice to employees in case it comes back to haunt them,” said Bucksey.

Increases to statutory minimum contribution rates will come into force in April 2018. But the system has faced criticism for being potentially unaffordable for low-income workers, which is likely to cause some to opt out, say critics.

“Employers need to be willing and able to explain why this is rising and encourage employees that it is good news,” said Carberry. “A pension is not a tax – employers need to help employees see this.”

For Bucksey, “if [the rate hike] would lead an employee to stop contributing I think the business should consider reducing the minimum rate”.

The research also showed that most businesses (76%) believe employees have a responsibility to engage themselves with workplace pensions.

Separate research by NOW: Pensions recently found that more than a quarter (28%) of senior business decision-makers are unaware that auto-enrolment minimum contributions are increasing on 6 April. It also found that nearly half (42%) are unaware of the planned increase to minimum contributions in April 2019.

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