• A successful workplace pension proposition should be built on the three pillars of auto-enrolment functionality, communications and investment strategy.
• Maintaining staff engagement levels in the new world of auto-enrolment will be a difficult but important task for employers because the number of apathetic scheme members is likely to be large.
As organisations grapple with the fundamental changes involved in introducing auto-enrolment, maintaining employee engagement will be a key factor in helping the process succeed, says Ann Flynn
Last year saw some remarkable events. Political change swept through north Africa and the Middle East as the Arab Spring brought to an end regimes in Tunisia, Libya, Yemen and Egypt. Economic turmoil also triggered change in European politics – new governments started work in Ireland, Italy, Spain, Greece and Belgium. Our industry, too, continues to undergo yet another significant transformation, with perhaps the most radical shake-up of pension provision ever set to begin in 2012.
We believe a successful workplace pension proposition will be built on three pillars: investment strategy, auto-enrolment functionality and communications.
Employers are looking for an investment strategy that provides the right elements to drive good employee outcomes. This includes a range of default funds designed to meet the needs of staff of all ages, life stages and risk profiles. The choice of default funds must be suitable for different employee profiles, and be supported by a robust governance process. The governance is particularly important as, increasingly, employers are looking for default solutions that include allocations to less mainstream investments such as absolute return funds, high-yield bonds and commodities.
Online auto-enrolment functionality is also vital for new and existing employees. The joining stage is critical to get right – it may be the employee’s first experience of a pension and employers must be careful not to scare them off. The process should be simple and clear so members do not get bogged down in complex issues, such as an over-engineered fund selection process.
Employers need to rely on experienced providers that can offer technology to run the auto-enrolment process. For some, this may be similar to current automated pension services with the addition of eligibility analysis, opt-out processes and triennial reviews. Larger employers with high levels of recruitment may prefer the more HR-integrated approach offered by corporate platforms.
Employers also face a more difficult and important task: maintaining employee engagement levels. That is because it is more likely there will be a larger number of apathetic scheme members than in the previous opt-in regime. For this reason, it is increasingly important for providers to help employers develop an engaging range of communications materials to give staff a clear explanation of auto-enrolment. This also ensures that employers themselves are more engaged with their employee pension scheme and remain committed to it.
An important role for pension providers will be to support employers and their advisers in meeting the challenges of pension reform and minimise disruption to the workplace. A positive approach is likely to deliver a scheme where members embrace the positive aspects of the change and feel engaged with their pension.
Ann Flynn is head of corporate marketing at Standard Life
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