Decades ago, a pension scheme would have played a vital role in helping employers recruit and retain talented individuals.
Today, however, things are significantly different. For one, employers are far less likely
to want to recruit employees who will stay with them to retirement. Moreover, as it is now a statutory requirement for employers to provide a workplace pensions arrangement, it is hard to make this a significant recruitment differentiator.
So, do pensions still have a role to play in helping attract talented employees?
In an increasingly transient labour market, portability is a significant benefit. Defined contribution (DC) pension schemes, which do not tie employees to their job over the long-term, now represent an attractive alternative to defined benefit (DB) provisions for those who are unlikely to stay in a post for longer than a couple of years.
While automatic-enrolment has introduced statutory minimum contribution rates, an employer prepared to contribute in excess of these will clearly have a more attractive proposition than one that does not. Additionally, the use of salary sacrifice, which reduces the national insurance bill for both employer and employee, should be considered.
Finally, employers should consider how well integrated the pensions provision is within a broader remuneration package. While a pension on its own might not necessarily be attractive to potential employees, positioned as part of a well-designed, flexible benefits package, it might play a critical role in helping ambitious employers target the best talent the labour market has to offer.
For example, employers are increasingly recognising the value of providing access to independent advice about retirement planning, which allows employees to make life-changing decisions with confidence.
Helping today’s employees to prepare for retirement involves far more than simply providing a pension scheme; the more shrewd of the nation’s employers will recognise this.
Tim Middleton is director of policy and external affairs at the Pensions Management Institute (PMI)