EB comment – It’s time to make staff obsess about salary saving

Everyone – government, employers, unions, staff and pensioners – is aware that we are facing a major pensions problem, and yet, for the most part, people are patiently sitting back and chatting among themselves in the hope that someone else will step in.

Last month’s report by the Employer Task Force warned employers that they faced compulsion unless they voluntarily improved contribution rates, offered good schemes and enabled to workers to continue in employment beyond the age of 65.

As always, the good employers will look at what their organisations are doing and see that it is good, and the rest will feel that it is not their responsibility. All the reports, all the media hype and all the government talk seems to be having no effect as evermore
employers turn their backs on final salary pensions, close them to new members, or reduce accrual rates.

Call me contrary, but at times I want to shake everyone and scream at them to ‘take the pain and bring back compulsion’ and at other times I wonder if it really should be the employer’s role to ensure that the nation’s pensioners have enough to retire on.

What is not up for debate is that employees need to put aside more of their salary into savings – and employers are in the perfect position to encourage them to do so. In past few years, people have blamed student debt for many not starting to save in their twenties.

However, I don’t recall too much of a pensions saving culture before then. And correct me if I am wrong, but surely not every young person starting in their first job has been to university and therefore might have a student loan to pay off, although I do appreciate many will be on a minimum wage.

>From the day you start work, there simply isn’t a widespread culture of saving a portion of salary (although a few of us had wise parents who forced us down this route). And if you don’t start in your early twenties because your salary is too low, you will not start in your thirties when you have a mortgage and a couple of kids to support, and before you know it you are in your late fifties and your pension pot is still looking pretty meagre.

The next big problem employers are going to face is a workforce of elderly people unable to retire due to poor pensions. Removing the retirement age will not force people to work until they drop, employees not contributing enough to their pensions during their working life will be the culprit.

On a different note, you may have noticed that the gremlins caused havoc with our December cover story on up-and-coming benefits professionals. If you would like to read the complete article, you can download a pdf at www.employeebenefits.co.uk/archive.