Debi O’Donovan’s insight into a key reward issue this week
For the past few days I have been staying in the friendly climes of Edinburgh immersing myself in all things pensions investment, not least at the NAPF Investment Conference.
While here, I have met up with all the leading pension providers based here (and Edinburgh does have more than its fair share of UK pension providers’ head offices: Aegon, Scottish Life, Scottish Widows and Standard Life).
What has struck me is, just as HR and benefits managers can feel daunted by any talk of pensions investment (far too much jargon and complex geek speak), so too pensions investment experts can get more than a little lost with talking ‘HR’.
They know they need to get the message across that HR should be taking a greater interest in the quality of the default investment fund being offered to staff (to the benefit of both employers and employees).
But articulating why, when HR have so many other urgent priorities on their to-do list, is tricky.
For me there are three key HR push points:
- Corporate risk is a key factor. If HR cannot show they went through due process to ensure they are trying to offer the most appropriate default investment fund to their staff, they could well be facing lawsuits from staff in the future who feel they were ‘mis-sold’ (it already happens in the USA, which is years ahead of the UK in this space).
- With auto-enrolment, increasing amounts of money will be coming out of payroll and going into default funds (80-90% of staff are in the default fund in an average DC pension scheme). The business will want to know this is money well spent, and is not going into poor-performing investment pups that will scupper the chances of staff being able to afford to retire at a reasonable age.
- HR probably is likely to be paying (by whatever means) an adviser to advise on that default fund. So they should get their money’s worth and push their adviser to review it at least annually and to act if it is falling below set benchmarks.
There is a lot to learn on both sides here, but with billions of pounds at stake over the coming years, and plenty of experts keen to educate (albeit to make money along the way, not unreasonably), the Tower of Babel must fall quite soon between HR and pension investment experts.