Now the final scheduled auto enrolment contribution increases have occurred the focus should be on pensions education.
The original governmental announcements about the pensions auto enrolment regime probably now seem as distant a memory to many people as a certain Prime Minister’s utterance of his “three” immediate priorities when coming to office.
Furthermore, since auto-enrolment actually started being introduced in stages in 2012, its roll-out has been subject to chopping and changing and has at times appeared never ending.
But, with the maximum scheduled 8% mandatory overall contribution minimums having finally been reached this April, now seems an ideal time to ensure that workforces receive adequate education on pensions.
This argument is reinforced by the recent publication of research by Willis Towers Watson showing that defined contribution pension assets now exceed defined benefit pension assets in the seven largest pension markets for the first time.
With defined benefit schemes it is the employer that takes the investment risk but with defined contribution schemes it is the employee, so the need for education is more crucial.
Simply electing to save a percentage of salary into a pension scheme is only part of the jigsaw. Employees should also understand the size of pension pot they need to accumulate by their intended retirement date and the range of options open to them under the new pension freedoms introduced in 2015.
Are they, for example, intending to purchase an annuity at retirement or are they planning to draw down on their pension fund? The two approaches can necessitate very different investment choices.
Employers should understand that ensuring that employees get the right pensions guidance and advice is not simply an exercise in paternalism. It is also very much in their business interests.
The pensions freedoms, if scheme rules permit, can effectively enable employees aged over 55 to dip into their pension funds as and when they like in a similar way to a deposit account. But those who withdraw too much might find themselves unable to retire when they want to.
This could have a major impact on a company’s succession planning.
Although the government’s Pension Wise service can offer employees a level of free impartial guidance, it has received mixed reviews. It can also only be accessed by those aged at least 50, but the new pension freedoms have created a greater need to offer pension planning mid-career as well as at the point of retirement.
Employers may therefore wish to consider engaging a firm of expert advisers that can deliver cost-effective seminars and workshops with no potential regulatory repercussions. Chase de Vere is unusually well placed to assist in this respect because, unlike many of our competitors in the employee benefits space, we have an independent financial adviser (IFA) arm.
We are also able to provide one-to-one face-to-face sessions for employees requiring personal financial advice. Employers don’t necessarily have to foot the entire bill for this, as it can be structured so that employees pay for some or all of the costs.
Additionally, we are able to offer educational services that extend well beyond just pensions, and can tailor a programme that suits your exact requirements and budget.
For example, some employers may decide that the overall financial literacy in their workforce is low enough to warrant a starting point of raising financial awareness as a whole.
In which case they may be interested in our basic Foundation course – which addresses issues like paying off debt, saving and protection – or in a course at the next level up which can explain how an employee’s benefits package fits in with the financial issues we’ve raised awareness of.
It is now generally accepted that money worries constitute the biggest source of workplace stress, so employers who provide basic financial education can go a long way towards combatting this, therefore reducing absenteeism and presenteeism costs and increasing engagement.
Other less obvious benefits can include reductions in insurance premiums and in HR admin costs, as a result of employees asking fewer questions, and less pressure to increase salaries.