What's the biggest challenge companies face with their workplace pension scheme in 2018?
We’re delighted to welcome a panel of senior HR directors to the Punter Southall Aspire blog, to share their insight into the rapidly changing workplace pensions and savings landscape.
Here are some of the things they share with us about the biggest challenges they believe companies will face with their workplace pension scheme in 2018.
“Changes to the annual allowance for high earners”
“This year, we’re going to start to see the changes to the annual allowance start to bite for high earners. (According to current rules, some people with an adjusted income of over £150,000 see the amount they can save taper down to £10,000).
“If you are in Financial Services, in your 40s, and on an upwards trajectory, cutting your pensions contributions when you have only been paying into your pension for 20 years and are only halfway through your journey is very significant.
“People can still use allowances from previous tax years so it hasn’t really bitten yet, but it will this year!
“We are going to have to think of other ways to help people save for their retirement and look for other vehicles to help people save, other than pensions. However there is a lack of product innovation.
“Our staff are aware of this as we have done an educational piece, and so have others in my network. We’ll have to see whether people really understand the implications though.
“This is tough for companies with lots of high earners and a generous workplace pension scheme, because you are effectively cutting people’s benefits, but not because of your own doing.
“We will also be keeping an eye on interest rates. If these change significantly, people will have less disposable income and it can affect how much people will put into their pensions. If you are paying in more than the minimum and need to find extra money, I can see people going back to the minimum.”
Penny Hathaway, HR Reward Manager, THB Group
“Maintaining a good return on investment”
“Maintaining a good return on investment for our staff. With Brexit and all the uncertainty, funds might suffer – nothing is secure…
“It will be more important for our advisers to keep a closer eye on things, particularly on our default fund which is where most people end up staying, to make sure we do the best by our people.
“Another issue is encouraging staff to stay in a pension plan. With a squeeze on salaries and inflation rising, I think there will be people, particularly in the younger mix, who say they can’t afford to be in [workplace] pension schemes.
“There’s been no sign of that so far this year – the small number of people opting out is surprising – but I’m worried that will change as people get squeezed economically.”
“The biggest challenge for us is going to be getting [good] comms out there, helping people understand how important it is to think seriously about their pension and how much they are putting into it.
“It’s not new, but we have an ageing workforce, and want people to make informed decisions so they can actually retire before they burn themselves out and so that the amount they receive at retirement doesn’t come as a shock.
“People taking ownership of their own provision is an ongoing priority for us. On one of our sites in particular, which was acquired through a merger, many people had no pension before automatic enrolment and are still at minimum contribution level. Getting people thinking about doing more is not something you can accomplish in a day. It is a long journey.
“For us, an important moment is when we do our salary review letters. We always tell people that if they want to increase their pension contributions this would be a good time, and see a flurry of increases.”
“Minimum contribution rates rising”
“We know that contribution rates are about to change for our DC scheme, due to the changes to automatic enrolment minimum contributions in 2018.
“Funding that will be a major preoccupation for us next year. There is obviously a cost to the business and we need to think carefully about how to fund it and maintain our margins [...] Our finance directors are all thinking about this and factoring it into their plans for next year.
HR Service Director, Food company
“Convincing people that pensions are a good investment”
“Because of Brexit and the financial uncertainty, more people are wondering whether a pension is the best investment for their future. They’re interested in flexible benefits.
“The challenge for companies is around the education piece and engagement. It’s not enough to enrol people into the scheme, we need pension surgeries and lunch-and-learns to help people see the value of the pensions that they’re in”
Topics: HR Panel