Ian Baines: Should employers pay more than the minimum contributions required under auto-enrolment?


Should employers pay more than the minimum contributions required under auto-enrolment? The short answer? Yes.

Very few organisations have a bottomless budget and therefore each must make a strategic decision on what benefits it offers employees and the level of provision it wants to make. At the heart of this decision will be the age-old value proposition debate about which benefits give the biggest return in supporting recruitment, retention and motivation of employees.

Against a backdrop where many employees are disengaged from their workplace pension or the concept of pension savings, it is hardly surprising that many employers choose to minimise their pension offering and provide benefits which their employees attach greater value to.

However, the success of auto-enrolment in overcoming such disengagement and getting larger numbers of employees into a pension shows that change can be brought about and that most employees accept that it is in their interest to make pension provision.

For most employees, pension provision is a defined contribution (DC) plan and the DC market is evolving tremendously with great new ideas, initiatives and products becoming available. The use of behavioural science and marketing concepts long accepted by other sectors are good examples of this.

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At Nationwide Building Society, we know that you can succeed in getting employees to engage more with their pension and crucially increase their pension contributions. Three years ago ,only 10% of our employees in the DC plan paid more than the core minimum pension contribution, whereas now we have over 80%. This has been done by using behavioural ‘nudges’ together with a good communication plan. And yes, our employees do tell us they value their pension provision and yes, we regularly remind them how good it is.

Ian Baines is head of pensions at Nationwide Building Society