Debi O’Donovan: Auto-enrolment has put pensions centre stage

By and large, the initial reaction to pensions auto-enrolment, by those employers that have gone live, seems to be positive.

And the word on the street (or at least at the National Association of Pensions Funds’ annual conference last month) is that although we know that such low savings rates (starting at an initial 1% contribution each for employee and employer) will not necessarily give people the retirement they need, it is the only place to start.

Beginning with higher contributions risks scaring off some people. And there is nothing to stop employees and employers from contributing more.

But in our flurry to get people into the pension savings habit, we must not forget those at the other end of their savings and working lives. Help with accumulation is important, but so is help with decumulation.

I am hearing of more providers starting to talk to workers in their 40s (and so at least 25 years away from any form of retirement) about the investment strategies they are using for their pension savings.

The investment needs of a 20-something trying to maximise growth are different from those of someone in mid-working life hoping to lock in gains, which is again different from the needs of someone in their last 10 years before retirement seeking to safeguard their pension pot.

On that last point, the idea that someone has a set retirement date has changed. It is no longer a question of when they will stop working, but how. Will they simply stop one day, or move to fewer shifts, days or hours? Will they step into a different role on a lower income for a few years?

This shift affects how an organisation plans its future workforce, maximises experienced talent or deals with any declining performance. It also changes the way these employees are paid, whether they start drawing some of their pension or continue paying contributions.

I never understand people who say pensions are boring; they tap into many crucial elements of reward, HR and business planning and there are challenges and opportunities around every corner.

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Which reminds me, if you are a reward, benefi ts or human resources director responsible for your company’s pension and you need to have this broader HR/business/employee savings view, then you will find our annual Pensions and Workplace Savings Summit on 31 January/1 February invaluable.

Debi O’Donovan, Editor, Employee Benefits
Follow on Twitter @DebiODonovan