The statistics say that auto-enrolment works for larger employers, with far fewer opt-outs than many initially predicted, but now comes the difficult part: how do we increase the appreciation of these benefits so that there is a return for the employer?
It’s sad, as a pensions manager, that inertia is the main thing responsible for the boom in pension savings, but ultimately inevitable, when the engaged have already joined or taken the active decision to opt out.
So now we’re faced with the challenge of articulating the value of a benefit to which both the organisation and staff contribute, but is perceived to be of little value, and is often described as inferior to the benefits enjoyed by previous cohorts of employees.
Pensions have never been a particularly engaging benefit in that it does little to motivate employees and change behaviours. However, a good defined benefit (DB) scheme can aid retention, although this can lead to problems of its own, as employees recognise its value but become disinclined to develop, ultimately becoming less productive and simply ‘seeing out’ their time to retirement.
So, will this see a rush towards total reward statements or financial dashboards for employees, which illustrate the value of pensions within the reward package? While it’s a lot easier to ascribe a value to a defined contribution benefit than to a DB one, and as pots grow, this tends to illustrate the cost of pensions as opposed to the value.
There’s still a long way to go for employers to get a decent bang for their buck here.
John Chilman is group reward and pensions director at FirstGroup