As I See It: Peter Mutch
The question of pensions has been a huge area of concern for governments in recent years, particularly with the prospect of an ever more expensive but less generous state provision.
Specifically, how those starting out their working lives can best prepare for retirement in the decades to come has been key area of policy, and in 2012 we saw the introduction of pension auto enrolment as a tool to try and solve what could be a very expensive problem.
Until the introduction of auto enrolment the onus had very much been on individuals to ensure they had made appropriate arrangements. However, the new system has undoubtedly shifted much of the responsibility to employers.
Understandably there was a bit of a slow burn in the first couple of years, but recent figures brought some welcome news in terms of take up, and importantly the amount being saved. The latest statistics from the Department for Work and Pensions revealed that almost nine in 10 eligible workers were saving into a workplace pension by the end of 2018, with around £90 billion of contributions put aside, an 8% year on year increase. All good, it would seem.
However, the report also highlighted a slightly worrying trend, with the number of people saving in at a least three of the last four years down two percentage points from 2017. Much of this could well be attributed to the increase in total minimum contributions, from 3% to 5%, but that probably doesn’t tell the whole story.
Employers, both public and private organisations, do of course have their normal regulatory and legal responsibilities to make sure that they both provide a suitable scheme for their workers, and ensure it is managed and operated appropriately. The consequences of not doing so can be severe and a visit from the Pensions Regulator may not be too far away.
But there is also a wider obligation by an employer to encourage as many of their employees as possible to engage, so at the very least, they can make a conscious and informed decision on whether they wish to participate or not. And that is simply down to adopting a robust communication programme for both new and existing workers which provides all of the necessary detail in a timely, regular and easy to understand manner.
There is no doubt that, for an employer, especially small and medium sized firms, implementing and managing a workplace pension can absorb significant financial and management resource. But the benefits of doing it well far outweigh the deeper problems which will inevitably arise by cutting any corners.
Business owners and senior managers already have a raft of priorities and an in tray that grows by the day. They also need to be experts in a range of disciplines, from HR, to finance and marketing.
Developing an in depth understanding of the auto enrolment system on top of everything else is no easy task, but help and support is available, and taking professional advice on pensions is no different to that of using a lawyer or an accountant.
Auto enrolment is here to stay, and the importance of pensions to individuals will only grow. Getting it right for all your employees is vital, both for their futures and yours.
Peter Mutch is corporate benefits director at Aberdein Considine