Pensions can seem complex for employers and employees alike. If you employ people within your business, it’s very likely that you’ll need to provide them with a pension to help save for retirement. And make contributions too.
Whilst these regulations can add challenges to a business, it can be beneficial for all parties if you take steps to help employees make sense of their pensions.
Auto-enrolment: Changing employer responsibility
Auto-enrolment was introduced in a bid to encourage more people to save for retirement. It’s been hailed a success, according to the Pensions Regulator, there are 10 million more workers now saving into a Workplace Pension scheme and just 10% have chosen to opt-out. It’s a positive step for employees but it represents a significant increase in the amount of responsibility that employers must take.
All employees that meet the criteria below must be automatically enrolled into a qualifying Workplace Pension:
- They are aged between 22 and the State Pension age
- They earn at least £10,000 per year
- They usually work in the UK
If your business doesn’t supply a Workplace Pension to eligible employees you may face enforcement action, including fines.
However, a business’ responsibility doesn’t stop with providing a Workplace Pension, you also need to contribute. The current minimum contribution level for employers is 3% of pensionable earnings. For employees, it’s 5%. It’s expected that minimum contribution levels will gradually increase to reflect the amount individuals need to save to enjoy a comfortable retirement.
With these additional responsibilities in mind, you may think that providing financial education to help staff get to grips with their pension is a task you can do without. But it’s a step that can benefit your business for many reasons, including these five.
1. Help staff understand the contributions you’re making
Whilst your staff may be paying into a pension, it’s probably the figure leaving their paycheque each month they focus on. Some may be unaware of just how much your business is contributing to their future.
Taking the time to explain that you’re paying into a pension alongside their contributions can demonstrate that you’re investing in them beyond just their salary. For many people, a pension target can be daunting. Understanding that employer contributions are also helping them along the way can make it seem far more achievable.
This is also a good opportunity to explain tax relief and how this is added to contributions too, boosting pension pots even further.
2. Improve employee wellbeing
Money worries are one of the biggest causes of stress in the UK. It’s a concern that can have a serious impact on overall wellbeing and the health of your staff, and could be affecting your business too.
Did you know that 77% of employees say that money worries impact them at work? Or that 40% worry about their finances either always or often? It’s estimated that poor financial wellbeing has an impact on 89% of the UK’s largest businesses in terms of reduced productivity, loss of talent and increased absences.
Taking action to tackle financial stress, including concerns around pension and planning for retirement, can improve not only employee health but business operations too.
3. Improve retainment levels and attract talent
Finances can be complex and many people want financial advice. In fact, research suggests that 53% of adults would like to review their finances with a professional. Young workers, in particular, are keen to improve their financial knowledge. More than six in ten workers under 35 would want financial advice.
As a result, formally putting in place a programme to help employees make sense of their pension, and finance issues beyond this, can differentiate you from competitors. Making financial education part of your benefits package can help you retain talent and attract new prospects.
4. Motivate your employees
Evidence suggests that when employees feel valued, they’re more likely to go the extra mile for your business and clients. There are many ways you can show appreciation for your team members, including taking an interest in their long-term financial future.
The basics of understanding a pension can help employees get to grips with contribution levels and what this may mean for their future. However, going a step further, such as exploring investment options and how these savings can be accessed at retirement can be valuable. It’s one way of demonstrating that you care about your employees and want to see them do well, even after they leave employment. In turn, it’s a step that can help build a loyal, dedicated team.
5. It’s an opportunity for you to learn too
Finally, you should be saving into a pension too. Whether you’re a business owner or managing a team within a corporation, educating staff about pensions can help you as well. You could find that you should increase your own contributions to achieve the lifestyle you want or that a different investment proposition is more suitable for your situation. Reviewing your own pension can deliver peace of mind and confidence for the future.
How we can help
Whether you want help navigating the minefield of auto-enrolment or would like to set up a meeting to discuss financial education for your team, we can help. Our dedicated corporate team can work with you to create a bespoke solution that will enable employees to get to grip with their pension and really value what your business is providing them. Please get in touch for more information and to discuss your needs.
Articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional.