Debi O’Donovan: Personal accounts and flexible benefits

Debi O’Donovan, editorial director, Employee Benefits: Given the column inches dedicated to personal accounts (PAs) over recent months, you would think they were top of mind for everyone. However, we are finding that the vast majority of UK employers have barely begun to think about the implications of the incoming pensions changes in 2012, never mind maximise their potential by changing broader reward and employee benefits strategies.
As always, the best practice employers are on the ball with several having written strategy documents ahead of the changes, with others tweaking existing enrolment and contribution rules in order to ease in any financial pain over the next four years. Retailers in particular have had to look into the implications of auto-enrolment when they have huge seasonal workforces.
In the Employee Benefits/Towers Perrin Flexible Benefits Research 2008 published in March we asked if the introduction of PAs would influence employers’ perception of flexible benefits. Admittedly this is a narrow angle, but until we run our annual pensions research in August, this serves to give us some market guidance on employer reactions.
Using our sample of 488 UK employers, we found that 3% have decided to offer pensions as a standalone benefit through a salary sacrifice scheme in the light of incoming PAs; while a further 5% have considered introducing pensions to their flex schemes. Conversely, 4% are reconsidering whether they should continue to offer pensions via flex as a result of incoming PAs.
But at least these employers have begun to incorporate PAs into their strategic reward thinking.
We would expect these numbers to build as PAs are finalised and employers are fully confident that they will become a reality (there are some advisers who are questioning if PAs will survive past the next election – should there be a change of ruling party – and therefore whether it is worth putting to much effort into them now).
Assuming all goes to plan however, four years is a short time in employers’ benefit planning strategies especially those with large, scattered, diverse or unionised workforces. Renegotiating employee contracts to use salary sacrifice or switch to flex can take months. While explaining auto-enrolment and increased contributions to staff without scaring the horses, and instead increasing pensions savings among the UK workforce will be a major exercise in communication (as Otto Thoresen’s report last month demonstrated). Now is the time to start looking at the bigger reward picture to make the changes a positive rather than negative experience for employer and employee.