Yes...but you need to make a plan

It is the end of a long day, and you are starting to wind down.

Suddenly, your office door bursts open. Your CEO marches in, clearly agitated.

“I’ve just seen our payroll data. It appears that 15% of our employees have opted out of our pension scheme – in one month! Would you care to tell me what’s going on?”

You swallow hard. You know that this is a total disaster for your firm, undoing years of hard work to get your staff enrolled and engaged with their pensions.

What’s more, your CEO hasn’t noticed yet that around 20 staff members have left stinking complaints on about the way your company has handled their pensions.

They opened their payslips last month to discover that their take-home pay had dropped, because they were paying more into their pensions – and they were furious they’d had no warning.

No wonder they’d opted out en masse.

It won’t be long until you’re summoned to explain this fiasco to the entire Board, putting your own job in jeopardy.

You look at the CEO, unsure how you are going to get out of this.

The scary (...but not so scary) truth

The scenario I just described is a total nightmare – but it is not in any way unrealistic.

Chances are that in May 2018, there are many HR directors around the UK who will face some variation of this horror story.

That’s because a month earlier, on April 6, the minimum contribution required for qualifying schemes is rising. For example, if contributions are based on qualifying earnings, these will increase from their current level of 2% to 5%. Employers will pay a 2% minimum, with the remainder being paid by the employee.

At the moment, employees only need to pay 1% so this represents a noticeable increase in their contributions.

This minimum rises again on 6 April 2019 to 8%. Employers will pay a 3% minimum, and employees the remainder.

Clearly, every extra penny paid into your employees’ workplace pension should serve them well in the long-run. But in the short-term, it represents a cut in their take-home pay.

For many employees, particularly those on tight budgets, this will be a bitter pill to swallow, especially if it comes as a surprise. A 2% pay cut can throw monthly budgets out of kilter and make it harder to afford the things people want and need - rent, holidays or even new shoes for their children.

Given the choice between less money in their bank account today, and more money in their bank account in 30 or 40 years’ time, it will hardly be surprising if a great number of people quit their pension schemes.

If that happens in your company, as HR Director or Director of Benefits, you are the one who is going to be held to account.

But there is a silver lining here.

We are still a good five months away from the change. And that means you still have time to pre-empt these problems and avert that nasty scene with your CEO and the other directors but only just.

The employee engagement challenge

The change to employees’ contribution levels will be one of the most significant challenges your workplace pension communications, and employee engagement has ever faced.

Employees need to understand the change that is coming and be persuaded not to opt out.

But let’s be honest.

Telling employees that their take-home pay is about to be cut – oh, and by the way, this is a good thing – is going to be a very tough sell.

You may be tempted to kick this can down the road.

After all, it is still several months until the change occurs. There are many other more immediate priorities to deal with and the magnitude of the challenge makes procrastination seem very attractive.

But that would be a big mistake.

Much is at stake, and working out the correct way to communicate this change will take a lot of thought and planning.

It will also take time to get the word out and to get your employees used to the idea of a reduced pay packet - or rather, to calm down the inevitable worry.

This represents months of work. This is not a situation where you simply fire off an email to staff on April 5th, the day before the big event. It needs to be addressed urgently.

(Unless of course you fancy facing the Board….?)

Make a plan?

With nearly a month until Christmas, now is the right time to develop a communications and an effective employee engagement plan that you can launch early in the New Year.

  • How will you give your employees the basic facts, telling them about the legal requirement to increase their contributions?

    Employees also need to know how much it will cost them, and what difference it will make to their net pay. Worked examples showing someone at a typical salary and contribution level could achieve that objective. Don’t forget to explain how tax relief and increases in personal tax allowances will offset some of the extra cost.

  • How are you going to answer – or even pre-empt – their objection to seeing their take-home pay cut, and persuade them that this is vital for their welfare in the future?

    We have some suggestions for a good way to frame the issue here. You need to help your employees understand exactly what those extra few pounds will mean, in practical terms, for their future. 

    Just as losing £50 or £60 today has very concrete implications for them – difficulty going on holiday or buying those new shoes etc. – the money they gain when they retire has to be made concrete as well. In 30 or 40 years’ time, it may be the difference between being able to heat their homes, run a car or stay in the family home --- or not.

    Don’t forget to mention, as well, that it’s not just their own contributions that are going up – the company may well be paying more too. So ultimately that means a larger pension for them.

    Getting your key employee engagement messages right is the most difficult challenge.

  • How are you going to roll out this campaign?

    What channels are you going to use? What’s your timetable? Who is going to front this campaign? The practicalities need to be worked out well in advance.

The bottom line

You can’t prevent all opt-outs. Some opt-outs are probably inevitable, as you will discover in upcoming payrolls.

But a clear employee engagement plan supported by strong communications, ensuring employees understand and accept the changes and have time to make any financial adjustments, should keep opt-outs to a minimum and for you personally, mean avoiding that nightmare conversation with the Board.

A good outcome all round!


Posted by John Buttress

Topics: Employee Engagement

New call-to-action

Ask The Experts

Want to get in touch?
Just fill out the form below and we will be in touch shortly.


Next Generation Savings

Changing Workplace Savings Behaviour for the Better



We provide consultancy services to employers and trustees on contract-based and trust-based schemes, including master trusts. Our proposition encompasses governance, investment, administration and communications.



Establishing and governing the ideal workplace pensions and savings for your employees can be complex and time consuming. That’s where we come in.


Engagement & Education

We use innovative communication channels and modern technologies to help educate, engage and inspire employees across a range of financial topics.


Find out more


With greater choice and freedom in how and when individuals are able to access their pension fund, there is now an even greater need for early education and advanced planning. Find out how we help.



Our investment research division analyses and rates over 18,000 DC investment funds. The insight we have enables us to support your investment objectives, making sure they're on track to deliver.


Health & Risk

Our health & risk service provides tailored combinations of cover and cost to exactly match each employer's requirements, helping you get best value for your benefits spend.