25 November 2020
2020 has been a difficult, and often traumatic, year for employers of all sizes and in all sectors. So it follows that for many the subject of employee benefits has been understandably placed low down the list of HR priorities, and when the subject has featured for consideration it has often been largely confined to those benefits that relate to employee physical and mental health only.
Yet the pandemic actually impacts a far greater range of employee benefits provision, and one area that may well have been overlooked is that of Defined Contribution (DC) - also often known as Money Purchase - workplace pension schemes. The final pension outcomes from such schemes are usually reliant on several external factors, including investment returns, attitude to risk, contribution rates, life expectancy assumptions, and the target retirement date for each individual saver. And during the last 12 months any or all of these items may well have changed significantly.
In terms of investment returns, we need only look at the major share indices to see how much variation there has been since COVID-19 was first identified. For instance the FTSE100 reached the giddy heights of more than 7,600 in January 2020, then sank below the 5,000 line in March, and (at the time of writing) currently sits more reassuringly above 6,400, having risen sharply over the last few days in response to various items of news including the promise of new and effective vaccines for the virus.
And the reality is that all the other factors mentioned above may have been subject to change this year too. For instance many workers have experienced a period of lower personal income – and a likely linked reduction in their pension contributions – during the last few months. Others may have found their future employment and retirement plans completely changed by the pandemic, and even those not impacted by all of the above may now need to understand the new state retirement age and how that impacts their potential retirement income, or indeed how the nation’s life expectancy assumptions are currently in a period of flux also. The bottom line is that many of the underlying cornerstones of DC pension planning may have moved significantly during the course of 2020.
All of which suggests that employers need to ensure that their workers have access to professional pension experts to reassure workers and help guide them through any concerns they may have. And the easiest way to do that is via pension scheme “surgeries”. So how many employers embrace this approach, and how many have been able to support such surgeries during the months of lockdown and social distancing?
Howden’s latest research on this important area is being published this week, and importantly it highlights that 4 in every 10 employers questioned don’t offer regular pension surgeries to their employees. This is somewhat surprising since the requirement to offer and contribute towards a pension scheme for all employees is now a well-established legal requirement. So it follows that it’s in the employer’s interest to maximise the goodwill and engagement of such a policy to ensure a return on their pension contribution costs.
So what can be done to widen the availability of pension surgeries in these difficult times and beyond?
Firstly we need to look at the objections to offering such a useful support service, which will often boil-down to the cost in both time and money of organising such sessions. These are clearly valid concerns for employers with workforces spread over a wide geographical area, and/or for those employers with limited funds to deliver a physical “in attendance” pension surgery session.
Yet one of the few positives of 2020 is the way that UK business has embraced video conferencing, which can also be used effectively to deliver pension surgeries too. Indeed Howden has found that “video” surgeries provide a number of advantages over the traditional face-to-face method of delivering such session in the physical workplace. In particular the ability to deliver the session(s) at a time more suitable to both the employee and the employer has been very well received, particularly as it typically involves the HR department and employee line managers with far less logistical work to stage each such surgery. Remote surgeries also generate a greater sense of privacy for the employee, and of course can and do reach even the most isolated team member as well.
So we would encourage many more employers to consider operating this new approach to pension surgeries. It represents a more robust, less time heavy, and potentially cheaper way of ensuring that workers fully understand and appreciate their pension scheme and employer pension contributions too.
For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our website for other contact options. For the latest details on COVID-19 & Employee Benefits provision please visit our coronavirus hub.
Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.