As we near the peak of auto-enrolment activity, some companies are already looking beyond auto-enrolment to explore how they can improve their pension schemes.
A third of the employers we have met in the last three months are looking at making changes to their workplace pension scheme AFTER they have auto-enrolled their staff. Our Employer Survey reveals 59 percent of companies who have auto-enrolled used their existing pension provider to do so. In the race to implement auto-enrolment, this was understandably the simplest and most appealing option available to them.
But with more time on their hands after auto-enrolment, employers are now looking at the features of their pension scheme in more detail, with a view to getting more out for themselves and their staff. Laith Khalaf, Head of Corporate Research: ‘We are seeing the start of Auto-Enrolment Phase 2- companies moving forward from auto-enrolment by improving the pension scheme they’ve got. UK employers will be paying billions of pounds more into pensions as a result of auto-enrolment; naturally they want to ensure they are getting maximum value out of their scheme, both for themselves and for their staff.’
What are companies looking to change?
Our February Employer Survey revealed the main areas of concern for employers: 44 percent of companies will look at governance; 38 percent will look at default fund performance and 28 percent will review employee communications. Companies currently pay £10.7 billion into Defined Contribution pensions for their staff. Hargreaves Lansdown research has found that £5 billion of this is effectively wasted, as employers believe 46 percent of staff do not appreciate the money the company pays into a pension for them.Auto-enrolment is further raising the stakes, with up to a further £4 billion a year in company pension contributions anticipated by 2018. Employers are paying more money in; it makes perfect sense they are beginning to look at getting more value out.
Laith Khalaf,contunued: ‘Auto-enrolment will boost the number of pension savers, but on its own it won’t make them appreciate the money their employer is paying into their pension, or how much they should actually be saving for retirement. It needs to be followed up by efforts to increase employee engagement, because this is an effective way to reinforce the value of company pension benefits, while at the same time encouraging staff to make better savings decisions which will enhance their retirement prospects.’
