The last 12 months have been hard work for HR and benefits professionals in dealing with pensions. Many have had to set up a scheme to prepare for auto-enrolment, or revamp their existing pension to make it more appropriate for their workforce.
But employers’ focus on pensions and retirement will not end when they reach their staging date and implement auto-enrolment. Their next challenge is to help older workers who are approaching retirement.
With the state pension age rising and employers no longer able to compel staff to retire, more employees will be working for longer, and many will have a more gradual transition from work to retirement. This makes it even harder for staff to plan, and even more important for them to secure a good deal in converting their pension pot into a retirement income.
Currently, savers lose up to £1 billion a year by not getting the best annuity deal. Employees will need support to stand any chance of deciding on the right plans and buying the best annuity, and employers must consider whether the help they currently offer is enough.
Employers must also consider whether their auto-enrolled staff are engaged enough and have realistic expectations. In October 2013, the National Association of Pension Funds conducted research with newly-enrolled scheme members, publushed in its Automatic-enrolment report, one year on. Most employees agreed with auto-enrolment and were relieved to be saving at last, but there was a realistic awareness that they were not saving enough, with 60% saying they were likely to save more in the future.
But, of course, this will not happen unless employers facilitate it. Employers that want their staff to be able to afford to retire will want to help them put more aside, perhaps with escalating contribution levels or higher matching rates.
Whatever employers’ approach, they must be mindful of the fact that getting staff into a pension scheme was always going to be the first step in a long journey to making sure they have a good outcome at retirement.
Richard Wilson is defined contribution (DC) pensions and investment policy lead at the National Association of Pension Funds