5 Reasons your workplace pension plan may be undermining your business (and why you should review it)

You’ve got a company pension scheme in place, so what would prompt you to change it? It might seem like a monumental task, especially when you already have myriad other responsibilities.

However, there’s a strong reason to do so: your business and employees may be at risk if you don’t take action. Additionally, shifting to a modern digital pension provider is surprisingly straightforward.

1. Is your existing pension provider maximizing your savings?

If your provider hasn’t informed you about salary sacrifice, the tax strategy that offers significant benefits, then you’re being short-changed. Salary sacrifice can result in substantial savings for both your employees and your business.

The tax you’re targeting here is National Insurance (NI). Both employees and companies pay NI, which is calculated based on salary size and total employee payroll, respectively.

By asking employees to lower their gross income (for example, by the percentage they contribute to their pension), and committing to contribute the difference directly into their pension, employees can actually increase their take-home pay.

This happens because lower earnings mean less NI to pay. Furthermore, they can continue to contribute the same amount to their retirement, even if their gross salary is reduced. In addition, a decrease in a company’s total payroll means less NI to pay.

Penfold has been assisting businesses with this strategy for several years and offer a seamless process to help with implementation. Find out more about Penfold’s salary sacrifice pension.

2. A potentially more secure retirement for you and your employees could be at stake

Sticking with your current workplace pension provider may be costing you and your team more than you realise.

Though past performance isn’t always a clear predictor of future results, the historical fund performance of pension providers can vary significantly, with some delivering satisfactory results while others fall short.

Average annual growth rates typically fluctuate between 3% to 4%. However, the poorest performers frequently fall within the 1% to 2% range, while the best are within 4% to 6%.

These percentages may not seem significant, but they can heavily impact the final pension fund of someone who stays with a low-performing pension provider throughout their career. A 1% deficit in the average annual growth rate could mean the average employee (with a median career salary of approx. £32k) loses over £100k in their final pension fund!

This underscores the necessity of regularly reassessing your company’s pension scheme.

3. Financial worries can severely impact employees’ performance at work.

Financially stressed employees tend to be less productive. A study by the Chartered Institute of Personnel and Development (CIPD) discovered that individuals stressed about money often take more sick days, feel demotivated, and become less satisfied with their work.

In a survey Penfold conducted last year, 87% of Brits reported that financial stress was affecting their mental health. Around 70% expressed concerns about being able to afford pension contributions.

Financial worries can lead to anxiety, distraction, and difficulty concentrating, ultimately reducing productivity.

An effective way to ease such concerns is by providing a simple, manageable pension scheme. Penfold’s workplace pension is accessible via phone or laptop, displaying current savings, fund performance, and how to save for the kind of lifestyle desired. Users can also easily adjust their contributions according to their expenditure.

By offering a clear overview of future income, it helps alleviate pension-related anxiety. Penfold also provide resources for financial wellness education and support.

4. Securing (and retaining) top-tier talent

Currently, the UK unemployment rate is near historic lows, standing at 3.9% in Q1 2023 (the lowest ever being 3.4% in 1973). This suggests that many potential hires are likely already employed. Here are two intriguing survey findings from a pool of 2000 adults:

16% of employees would consider switching jobs for better benefits, but 90% of employees would remain in their current job due to their pension scheme. If your employees aren’t interacting with your pension plan because it’s too complex or, perhaps worse, dull, it may be time to question the appeal of your most substantial benefit.

Penfold’s pension app is user-friendly and even enjoyable to interact with, thanks to its mobile-friendly interface. While it may not be as entertaining as TikTok, we’re doing our best to close that gap.

5. Changing the company pension plan doesn’t have to be a nightmare

Regardless of your company size, you’re free to alter your company’s pension provider at any point. There are no contractual obligations for a set duration. The process is as simple as 1, 2, 3.

  1. Inform your new provider that you’re ready to transition.
  2. Reach out to your existing provider and inform them of the change.
  3. Educate your employees about the switch and its implications.

Concerned about the third step? Worried about the surge in pension-related inquiries as employees start reviewing their plans and contributions?

A ‘welcome session’ from your new provider to address questions can greatly simplify things. Penfold excels in providing these sessions. We introduce the platform, explain its workings, and distribute a welcome pack to all new users.

The workplace has evolved. Perhaps it’s time your workplace pension did too. Learn more about Penfold’s workplace pension.