As the automatic-enrolment staging date period draws to a close, employers that made decisions about their pension scheme up to four years ago are coming into a review period. This review is an opportunity to look closely at pension schemes and to decide if previous choices are still offering value for money for both employer and employee.
Ultimately, the requirements from a pension scheme have not changed: employers are still looking for good-quality pension schemes and operational efficiency is a key driver in the switchers market; schemes should provide a digital model, operate efficiently at scale, link to payroll systems and be able to demonstrate value for money for the member. Running a pension scheme does not have to be hard and should be as simple as any other payroll function, so employers can focus their time and resources on more strategic considerations.
In any definition of a quality scheme or discussion of value for money, considerable focus is rightly given to the investment proposition, in terms of the performance and the amount of risk taken by the investment manager. This is particularly true for the upwards of 90% of savers who are staying in default funds where the difference between the best and the worst has a material impact on retirement incomes; the performance and risk profile of these funds should also be a key consideration when employers come to review their chosen scheme.
Many employers are now considering how their pension scheme design choices and chosen supplier link to their other benefits and the growing wellness agenda, particularly financial wellness. Within the pension arena this has resulted in an increased focus on member engagement, around 45% of respondents to the Employee Benefits/Nest Pensions research 2017 said they were providing financial education to some or all of their staff and 30% are actively considering whether to offer this, leaving around 25% of responders that have no plans to provide any financial education.
The research also showed many methods utilised to deliver financial education strategies. The three most common were face-to-face seminars (60%), one-to-one sessions (45%), and online through an intranet site (41%). Tied jointly for fourth place were online tools and modellers, and promotional literature (both used by 36%).
Measuring the efficacy of each approach and determining which is most appropriate for staff may also be worth exploring as part of any review in the future. Additionally, taking a step back and asking a fundamental question regarding what is the purpose of pension engagement for an organisation and what behavioural change do they want to drive is important for employers. It can help shine a light on the most effective method and best use of the available budget. For instance, does it lend itself to tweaking the scheme design or does it require a communication programme resulting in an individual’s active decision?
When asked about which retirement concerns affected their workforces, those responding said many savers had multiple worries. Around four in ten responded that the concerns pressing on their staff centred around savings, the best decisions when accessing benefits, and the potential lack of money or security in retirement.
The proportion of employers taking on the responsibility of providing financial education internally or hiring a third party to deliver these services, demonstrates the desire among employers to promote the pension and help their members to the best outcome, which brings us back to the focus of delivering value to members and organisations.
Gavin Perera-Betts is chief customer officer at Nest
