Reward research: nothing like a bit of pensions tinkering
Pensions are more than likely to be your most expensive employee benefit. And it is the benefit that has seen the most changes in the past few years – from auto-enrolment (AE) through to greater freedom and choice – making it one of the most challenging benefits for both employers and employees to get their heads around.
To help you understand what impact the changes have had on employee behaviours and what is ahead for 2019, we’ve pulled together a selection of the research reports from this complex area of reward and benefits strategy.
Adjusting to change
Three years into greater freedom and choice for those approaching retirement, LCP’s defined contribution (DC) scheme survey investigates whether schemes are truly offering flexibility, and if their investment strategies are offering appropriate levels of risk/return throughout the DC savings journey.
The findings suggest that many pension schemes have adapted the target of their default strategy to give more flexibility to members. In addition, 60 per cent of schemes now offer three or more lifestyle strategies, allowing members to target different retirement outcomes easily.
AE is the other area of pensions that has seen the greatest upheaval. Focusing on the impact AE has had on the nation’s savings habits, Scottish Widows’ annual Retirement Report investigates whether the initiative is enough for an adequate retirement.
The survey of more than 5,000 UK adults revealed that the number of under-30s saving enough for retirement has risen by nine per cent. However, more than one in five young people are still saving nothing. In addition, the survey highlighted the problem with ‘multi-jobbers’, who are missing out on £90 million a year in employer contributions due to the AE earnings threshold.
Employers’ pension strategies
Willis Towers Watson has captured the views of nearly 200 benefits professionals in its 2018 UK pension strategy survey report. Looking ahead into 2019 and beyond, the survey examines three key areas: emerging developments in benefits strategy and how employers are supporting broader financial wellbeing; employers’ strategies for DC provision; and changes to plan design in defined benefit (DB) schemes still open to future accrual.
It found that there is growing appeal of master trusts for DC pension schemes, as well as signs of increasing flexibility with what employees can do with employers’ pension contributions. For DB schemes, the focus continues to be on reducing risk and costs. Finally, financial wellbeing programmes were high on the agenda, as were adding alternative savings products to benefits packages.
Beyond a further increase in minimum AE contribution levels in April 2019 to a total of eight per cent of qualifying earnings, of which three per cent must be paid by the employer, the Pensions Dashboard is making progress.
The Pensions Dashboard is an online service which would allow people to see information from multiple pensions, all in one place. The aim is to drive up engagement with pensions and give people a real-time oversight of their savings.
The government has released a feasibility report and consultation seeking views on how the pensions industry can create these online dashboards. Reward professionals have until 11pm on 28 January to respond to the consultation.
The changes to pensions certainly see no sign with abating, especially with calls for AE contributions to continue to rise and the increasing focus of financial wellbeing in the workplace.
To better understand these and wider financial wellbeing issues, REBA has launched the FinWell Forum – a dedicated financial wellbeing conference – to investigate topics such as pay, insurance, discount schemes, debt management, financial education, savings, pensions, technology and ‘at’ and ‘post’ retirement solutions. REBA’s FinWell Forum takes place on 7 March 2019 in London. Registration for the event is now open.
The REBA Reports Library has hundreds of reports, surveys and other handy documents pulled together from a myriad government departments, academics, independent organisations and suppliers. We have pulled them together for our members to use to find the data they need to support business cases, presentations and other reward work.
Dawn Lewis is content editor at the Reward & Employee Benefits Association.
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