The ‘quiet pensions revolution’ of auto-enrolment
Yet today, just 1 in 10 firms are happy with their current levels of employee engagement on pensions
The two groups said that a ‘quiet pensions revolution’ is taking place thanks to auto-enrolment, with businesses investing heavily. Currently 92% of firms surveyed were contributing above the statutory minimum level requirement for auto-enrolment (AE) schemes (currently 1% for employers, rising to 3% by 2019). This equates to £133bn paid into workplace pensions in the 2019/2020 tax-year.
Many workers also recognise the value of saving into a workplace pension – across two-thirds of businesses only 5% or less of eligible workers have opted out of AE and 69% say a firm’s pension scheme is an important factor when looking for a new job. This may quell fears that employees will opt out when the limits rise.
However, the survey found significant variation in engagement by age, income and employment status/length of service. Those aged 50+ are almost twice as likely as (87%) those under 34 (48%) to be engaged with their pension. Higher wage earners are also significantly more engaged.
Neil Carberry, CBI managing director, said: “Engaging better with your workforce on pensions is not a ‘nice-to-have’ but absolutely fundamental to the success of workplace pensions schemes and well-funded retirements for workers.
“Although many firms do a great job, there’s an awful lot more that can be done to get staff engaged in their financial futures and to gain a better grasp of retirement planning. Many younger workers, those on lower incomes and employees who have been at a business for a short period are not getting the support they need to get to grips with issues that will help determine a successful path to when they retire.”
“Businesses are up for the challenge – nine in ten firms we talked to felt a responsibility to better engage employees with their pension schemes.”
When asked what stopped greater engagement, 59% said competing financial priorities among employees were an issue. There was also a lack of awareness and a lack of resources within firms to communicate with employees about pensions (24%).
The two groups recommended companies educate staff about the benefits of saving through workplace pensions (66%) and wider financial education (58%); use simpler language and minimise jargon in pension communications (63%); appropriate use of technology and individualising pension communications as far as possible (49%).
Paul Bucksey, managing director, Aegon Workplace Investing said: “Engagement is the key to changing behaviours and helping employees achieve long term financial security. When an employer gets behind their scheme and encourages the workforce to take action, engagement levels rise.
“Some employers are already going the extra mile to support their workforce in getting their pensions on the right track. But what remains clear is that whether you choose to hold roadshows, workshops or webinars, offer online financial planning tools or workplace financial advice, you need to do it regularly, as part of a wider financial awareness strategy. From recruitment to retirement, long-term planning and regular action will help your employees reach a point where they can afford to retire.”