Maximising value and visibility from your workplace pension spend

Employers will benefit more if they see pensions as a strategic asset with significant value and not just another expense on the balance sheet.

Workplace pensions are a critical tool for employee financial wellbeing, engagement and long-term retention. Yet while often the single largest employee benefit expense, many schemes run on autopilot, providing limited insight into the value they deliver for the business or its employees.

The majority of employers (82%) have not switched or considered switching pension providers, according to the Department for Work and Pensions (DWP) 2024 employer survey, which could highlight their complacency.

However, with rising costs and increasing regulatory pressure, employers can’t afford to treat pensions as just another line on the balance sheet. Progressive businesses are rethinking their approach, recognising pensions as a strategic asset that can deliver significant value.

This shift is timely. The defined contribution (DC) market is consolidating, a new Value for Money (VFM) framework is emerging, and regulatory expectations are climbing, with growing scrutiny from The Pensions Regulator on reporting, transparency, and member outcomes.

Employers must ensure their schemes deliver on three fronts: suitable investment design, effective governance, and meaningful employee engagement.

Failing to do so has consequences. Weak investment performance can leave employees financially unprepared for retirement, leading to delayed retirements and productivity challenges. Poor provider service or unclear communications can frustrate staff and erode trust, undermining morale and retention. Low engagement and administrative failings further reduce the impact of pension schemes as a retention and wellbeing tool.

Demographic change adds additional complexity. An ageing, intergenerational workforce can drive up benefits costs and increase financial strain if employees delay retirement—for instance, according to The Health Foundation, 27% of people aged 50–64 report having a work-limiting long-term health condition, compared to just 16% among 16–34 year-olds.

To maximise value and visibility from pension spend, employers need to move beyond a compliance mindset. A strategic, insight-led approach will ensure a scheme not only meets regulatory requirements but actively supports the business and people goals.

Assessing what good value looks like

Determining if a pension scheme is fit for purpose and delivers value requires a multi-dimensional view. While, investment returns matter, they are just part of the picture. Schemes should be evaluated across investment, administration and engagement through three key lenses:

Outcomes – for example, does the investment strategy deliver inflation-adjusted returns that meet members’ long-term needs or does the administration support members to access their benefits how they want, when they want?
Strategic fit – for example, do the scheme’s investment and engagement strategies align with workforce risk appetite and retirement goals?
Skill – for example, is governance and management effective, allowing the scheme to adapt at pace to rising expectations from both regulators and members?

The pace of change in pensions is accelerating, with new regulatory standards, evolving member expectations, and innovations in investment strategy all reshaping what “good” looks like.

What is considered value today may quickly be outdated tomorrow. Therefore, we recommend employers undertake regular health checks and market testing at least annually to ensure schemes remain competitive and aligned to future needs.

Common pitfalls to avoid

Placing too much emphasis on a single metric, such as cost savings or short-term investment gains can skew decision-making and overlook long-term suitability. Relying on league tables without exploring the reasons behind a scheme’s ranking can be misleading too.

Employers also sometimes underestimate the importance of administration quality and member engagements, which are vital for trust and participation. Also, without stress-testing performance during periods of market volatility, weaknesses may remain hidden until they cause significant problems.

Working smarter with pension providers

Maximising pension value requires a collaborative relationship with providers. Employers must set clear objectives from the outset and maintain regular communication to hold providers accountable.

Independent advisers can add value by offering market insight, benchmarking performance, and challenging providers to ensure members receive everything they can within the agreed costs – and that schemes evolve in line with regulations, market trends, and member needs.

Here are five practical steps businesses can take to maximise value and visibility of pension spending:

Define clear objectives: Decide what success means, whether improving retirement outcomes, boosting engagement, or managing costs.
Strengthen governance: Hold regular review meetings covering investments, administration, engagement, and compliance, and publicise this activity to employees.
Access independent insights: Use market benchmarks and DC pensions expertise to inform decision-making.
Hold providers accountable: Ensure delivery of agreed services, tools, communications, and innovations.
Plan escalation strategies: Understand your options and act early on underperformance or emerging risks, guided by advisers and industry data.

Today, pensions have the potential to be a true differentiator, signalling a company’s long-term commitment to employees while safeguarding their financial wellbeing. Managed well, they support timely retirements, reduce workforce costs, and deepen loyalty and engagement.

A 2022 from digital workplace pensions provider, Penfold found that 90% of employees see pensions as a key factor in staying with or leaving a job. The right pension strategy doesn’t just protect the future; it helps power the business today.

This was written ahead of REBA’s Future of Pensions Summit on 25 September as a collaborative article by Jeni Flanagan, Principal and Senior Client Relationship Manager, Hugo Gravell, Principal and Senior Investment Consultant at Barnett Waddingham, Emma Hadley, Head of Pensions, Employee Benefits Division, Howden and Saba Harran Executive Director, Pension & Benefits (Scotland) at Howden.

Jeni Flanagan and Hugo Gravell will be hosting a session on this topic at the Summit. For more information click here.