Three key statistics from Workplace Pensions and Wellbeing Research
“88.2 per cent of statistics are made up on the spot.” Vic Reeves, comedian, October 2009.
Being a big Vic fan (some people have even said I look like him, which is a worry), I love this statistic. But we must also bear in mind that he says other ridiculous things like: “D’you know, I put so much petrol in the car the other day, I couldn’t get in!”
So, I’m going to disagree with Vic on this occasion, and share with you some interesting (not to mention, 100 per cent accurate and real) statistics from Lorica’s Workplace Pensions and Wellbeing Research 2018. Our report summarises the views of 300 UK employers, covering all aspects of employee benefits and workplace wellbeing.
Before the usual festive frenzy ensues, below are three statistics that particularly stood out to me:
1. Only 53 per cent of employers pay more than the statutory minimum pension contributions
Hats off to those who are already doing more than they legally have to – but let’s be realistic about what counts as a meaningful pension contribution. It certainly isn’t the auto-enrolment minimum, for two reasons in particular:
First, the auto-enrolment minimums apply to banded qualifying earnings, meaning that for the 2018/19 tax year, the first £6,032 of earnings can be ignored for pension purposes. Many employers operate their auto-enrolment schemes on this basis; meaning that the lowest earners also receive the lowest pension contributions (both in monetary terms and as a percentage of their earnings).
Governance committee members and senior executives I’ve met, often do not fully appreciate the seeming injustice in this. Often there is a parallel scheme for more senior employees that pays an employer pension contribution for every £1 of base pay – and it is not capped at the top-end either.
Second, once the phased increases under auto-enrolment are complete, we’ll be at a minimum combined total of eight per cent (split three per cent employer, five per cent employee). This isn’t enough – a mid-teens number is what we need to aim for. With some smart budgeting, the use of salary sacrifice where appropriate, and considering that employers and the government contribute heftily, it can be achieved.
On a separate but related point, it is completely CRAZY that the eight per cent minimum is not split equally between employer and employee (see my previous rant in an earlier article for REBA about splitting the bill at the end of a curry).
2. Only 22 per cent of employers provide pre-retirement guidance or courses for employees – and 45 per cent of employers provide no support at all to help employees aged 55+ with their retirement choices
This really worries me, although it is encouraging that 56 per cent of employers stated they intend to do more to help employees navigate their retirement options.
I completely applaud and endorse the Pension Wise service. But I also firmly believe that employees genuinely need more support at work about their options – which have become vast in breadth and perturbing in terms of responsibility, especially when looking at flexi access drawdown. The Financial Conduct Authority’s Retirement Outcomes Report, published in June 2018, showed some alarming trends. People sitting in drawdown accounts in cash and, more worryingly, people only being in drawdown because they wanted the tax-free cash. These two facts alone are shocking and not what was intended.
3. Just under one-third (31 per cent) of employers intend to improve their benefits package in the next year
Why only 31 per cent? Remember, improvements don’t necessarily need to mean higher costs. Two relatively ‘low-hanging fruit’ issues that we come across quite regularly are:
First, post the removal of commission, there are still many defined contribution pension schemes such as group personal pensions that have not been repriced. This means they still carry member charges that included commission – even though there is no longer any commission being paid to an adviser. The clean market prices are much lower. If you previously set your scheme up on a commission basis, have you reviewed the terms and member charges since the commission-ban came into force?
Second, the pension commission gravy-train seems to have been replaced by flex and portal-based technology. When commission from pensions was vast, these platforms were often available ‘at no extra cost’ – and were effectively paid for by the member charges. Nowadays, the costs seem to keep creeping up in a seemingly unjustifiable manner.
Our research showed that 35 per cent of employers use platform technology to manage their benefits – this can deliver fantastic efficiency improvements and greatly aid communications. However, make sure yours is competitively priced – you may find significant savings are available.
Sorry, Vic but I love stats, and they seem to keep the world turning. Any readers who are interested in delving further into our insights can download our full Workplace Pensions and Wellbeing in 2018 report.
The author is James Biggs, consultancy and wellbeing partner, Lorica.
This article was provided by Lorica.
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