April 2019 sees the amount of money employers and employees pay into workplace pensions rise in the latest round of auto-enrolment increases. Yet, in the rush to comply with workplace pension legislation, many employers haven’t considered the HR and commercial opportunities that pensions present. The benefits of having a good scheme in place are many including increased productivity employee retention.
While auto-enrolment (AE) has successfully increased the number of people saving into a pension significantly, auto-enrolment (AE) should never be a tick box exercise. There is a raft of compelling reputational and sound business reasons to ensure that you choose the best plan available, then keep an eye on its performance. Indeed, so important is it to provide a meaningful pension that it should be part of any company’s business strategy. It should extend to supporting employees in their ability to gain the best returns for the lowest possible outlay, albeit underpinned by a statutory responsibility to provide a ‘good quality scheme’, although this isn’t always easy to achieve.
AE is a highly worthwhile social endeavour. However, it will only be a success where plans result in decent retirement outcomes. And with 96% of workers reporting to a major Ensign survey last year that a good company pension scheme is ‘very or quite’ important to them, there is a pressing business reason to delivering these too.
Most sectors in the UK are experiencing deepening skills shortages, with the nation’s productivity stubbornly trailing the other G7 nations and most comparable countries. It means that businesses must not only simply compete with one another for orders, but to sign up an ever-scarcer high, calibre human resource that has never been more aware of its value.
As such, being able to offer high quality, low cost pensions – and ensuring that workers feel part of, and engaged in, the process – is a major weapon in the armoury of any firm that must attract and retain top talent.
A well-managed, high-performing plan, underpinned by generous employer contributions, that is part of an attractive, progressive benefits mix, will help make your company a destination of choice for the highest skilled in your industry. Boosted employee morale, perceptions of being valued and sense of inclusivity will all also serve to lock in the brightest and the best.
It means that employers risk losing out on high performing staff if their chosen scheme is not up to scratch. However, amid a saturated pension market and the red tape that can often tie up those running their own scheme, resolving this issue can be far from straightforward.
One route to consider is joining a not-for-profit, industry-specific, Master Trust, conceptually and historically championed in Australia under the guise of “super”. These help employers meet their AE responsibilities by providing a relevant workplace pension scheme that complies with legislation, while geared to improving retirement outcomes for employees.
They benefit HR departments by removing the increasingly difficult burden of pensions regulation and statutory demands. Typically, many Master Trusts are administered by a single trustee board that has a significant track record in both pensions and the industry that they represent. It is supported by an experienced executive team of pensions professionals focused on providing high-quality services.
With industry specific Master Trust arrangements, you can also find participating employers forming a community of like-minded organisations. This may even go as far as the make-up of the Trustee Board, with employers and members being represented, ensuring a true affinity with and sensitivity for member businesses, that you simply wouldn’t get from general pension providers driven by the profit motive.
With this in mind, schemes can be tailored to the varying needs, working patterns and career cycles of employees that exist within particular industries. An example is the UK’s maritime sector, where plans must chime with the transient, seasonal nature of seafaring professionals and longer, on-shore tenures alike.
Fully portable between participating companies, staff can build on earlier savings. As life and employment circumstances change, they can continue to pay into the same pension pot as they join, leave and return to employers without additional cost or administration
Many not-for-profits have no shareholders to consider, so all earnings go back to the plan, meaning that returns for pension-holders are maximised by Master Trusts. With members’ interests always the top priority and because there is one board of trustees, but multiple employers, they are much more cost effective. Indeed, some of these industry master trusts are able to boast some of the lowest management charges in the savings sector.
There will never be any shortage of employment regulation and impending legislation will forever be on the horizon. Ever-changing work models and increasingly splintered patterns; demographic shifts; and seismic drivers for change, like the tech revolution and Brexit will see to that.
However, amidst this uncertainty, a pension should be a source of security that anchors an account-holder’s present to their future. And AE gives HR departments the chance to fulfil their moral responsibilities to employees, while bringing great competitive advantage to their organisations.
Ivan Laws – Pensions Director – Ensign