Workplace pension schemes are often just seen as a mandatory benefit. However, when properly understood, pensions actually offer great value to employees and employers.
The 2024 Drewberry Workplace Pension survey found that 60% of UK employees would rather have higher pension contributions and fewer other benefits. That said, 1 in 5 people don’t have a very robust understanding of how a pension works.
With these insights in mind, employers can take a good look at what they currently offer to their employees and consider enhancing their pension scheme. You can turn a mandatory benefit into one that your employees truly value.
It’s important for your employees to understand their workplace pension and the value it provides if you want to encourage them to get saving. As an employer providing the pension, you play a role in helping your staff to prioritise their retirement and inspire them to do so. Here’s how you can up the ante and make your employees care about their retirement plans.
Why Are Workplace Pension Schemes Important?
Workplace pension schemes are important, as it helps your employees to build up a substantial savings pot for their retirement. Since retiring traditionally means people work less or don’t work at all, their income is lower.
There’s a reason workers can be auto-enrolled into a pension scheme as soon as they hit 22; it gives them plenty of time to save and allows room for lifestyle and career changes.
Retirement Living Standards state an individual needs around £31,000 per annum to live comfortably. Although those who have worked throughout their life receive a state pension, over a year this equals nearly £11.5k. This is just over a third of what is suggested for a comfortable retirement, making workplace pension contributions all the more important.
Making Pensions A Priority
If employees don’t save enough, there is a risk of having insufficient funds for retirement. This is part of the reason why staff value their pension scheme. However, as an employer, if you don’t provide a good workplace pension, you could end up losing your top talent. Our survey revealed that more than a quarter of employees would change jobs for better pay and benefits, so it’s essential to put some thought into the benefits you offer to your workforce.
Benefits Of Workplace Pensions For Employers
As we’ve highlighted, many people are willing to leave their current job for better benefits. By providing a benefit that goes above and beyond the mandatory offering, workplace pensions become a benefit that helps to retain your employees and also attracts it.
What’s more, if set up using the salary sacrifice method, employers can enjoy National Insurance (NI) savings. You can also provide additional value to your staff here if you decide to increase employee contributions or their take home pay with the NI savings.
Your employer pension contributions are also classed as an allowable business expense, helping you to save on your corporation tax bill.
Benefits Of A Workplace Pension For Employees
There are many good reasons why employees should pay into their workplace pension, including:
- Employers pay contributions too, boosting how much they save each month
- Tax relief is provided by the government (essentially free money on top of contributions!)
- Eligibility for a tax-free lump sum when retiring
- Increased retirement income beyond the state pension.
Reiterating these benefits to your employees could help keep them engaged with their scheme and remain opted in. But there are definitely more actionable steps you can take to support your staff.
| “Longer lifespans – coupled with the cost of living crisis – could see pension savings stretched as employees head towards retirement. Despite this, Open Access Government reported that savers are losing track of their pension pots as they move between jobs, with the value of lost pots reaching £26.6 billion. It’s never been more important for employers to get their teams engaged with their pension.” Tom Conner Co-founder, Drewberry |
How To Boost Employee Engagement With Your Pension Scheme
Awareness and understanding is vital to improve employee engagement with their workplace pension scheme. There’s no use providing a pension scheme if staff don’t understand it or see why they should care about it. As they say, “knowledge is power”. The more your staff knows about their pension, the more they get from the benefit.
Here are five ways to improve employee engagement with your company pension
Provide Financial Education
With 19% of employees unsure about the ins and outs of their pension scheme, the first step to ensuring your employees care about their pension is ensuring they understand how it works.
By providing financial education in the workplace, you can help your staff to see the impact of retirement savings. When they see how valuable their pension scheme actually is, and how important it is to save up some cash, you’ll find staff are more engaged with the benefit.
What’s more, as an employer, you play an integral part in supporting your employees’ financial wellbeing. Doing so not only benefits each employee but also shows your commitment and investment in your staff as a whole.
There are many effective ways to offer education on pensions. You could provide:
- 1-2-1 financial adviser sessions
- Employee benefit platforms, e.g. My.Drewberry 👀
- Access to webinars and workshops
- Informational resources from your pension provider
- Retirement planning tools and calculators
- Tailored learning sessions on different topics within pensions (such as tax relief and salary sacrifice options).
Considering over half of the UK workforce doesn’t understand tax relief or salary sacrifice, the last point is even more important.
The more your staff know about their pension, the stronger their financial literacy, helping to provide a boost in engagement.
Personalise The Experience
Every employee’s retirement will be different. As such, a one-size-fits-all approach to retirement savings is not effective. People have different goals and plans for their retirement, and this can influence their attitude towards saving.
Personalising the experience can help each employee figure out their saving goals and how to achieve them, based on their personal circumstances.
When staff understand the importance of saving for the future on a personal level, they’re more likely to be engaged with the scheme. Why should they be saving? What do they envision their retirement looking like? Consider 1-2-1 sessions with a financial adviser for your employees, as this service will hone in on the individual and their personal situation.
Communicate Clearly And Effectively
Ensuring your employees are in the know about their scheme is vital for employee engagement. Your pension provider plays an important role in communicating your pension, but to keep your team engaged, it’s also important for you to communicate your pension scheme effectively.
By providing regular and clear communications, you can:
- Ensure your employees are aware of their pension and the options available
- Help staff to make more informed decisions about their retirement
- Meet your legal and regulatory requirements as an employer.
Talking about pensions doesn’t necessarily have to be boring. There are a range of multi-media channels to utilise when sharing information or providing updates, including email, webinars, 1-2-1 sessions, intranet, and employee benefit platforms. Rather than long documents, interactive communications with visuals can go a long way in engaging your staff.
Use The Right Language
How you convey information about pensions is important too. You need to consider different employee demographics and tailor your messaging to the audience.
- Younger employees
Reiterate how important saving now for the future is. Highlight your full company benefits package alongside your pension scheme. Don’t forget to emphasise the fact you also pay into their pension each month
- Those aged 30+ and/or with families
With this demographic, employees are likely to have more financial commitments, which impact how much they can save for retirement. Provide support on balancing these commitments (e.g. mortgage payments, family life…) and savings
- Employees closer to retirement
Older staff are likely well aware of how important retirement plans are. Make sure to communicate the tax benefits of pension savings. And highlight the investment options they may want to consider in their remaining working years to boost chances of higher returns.
Utilise Technology
Finding the information they need about their pension isn’t always straightforward or accessible for employees. 24% of employees said they didn’t know how to access info on their pension and would have to ask their employer.
Long policy documents provided by scheme providers can be a bit of a headache. What you really want is information that is readable and easily digestible. An employee benefits platform can help you to share facts interactively.
Employee benefit platforms, like My.Drewberry, make pension schemes a little less boring. My.Drewberry includes your workplace pension as a visual ‘card’, which includes all important information. They can easily view contribution amounts, update contributions, and see where their money is invested, and much more! Instead of looking for information on the provider’s website, everything is all in one place with benefit platforms.
Your staff can easily access their workplace pension scheme and get a better understanding of its benefits. Such platforms give employees better visibility and control over their benefits, helping them to manage their pension and navigate their options themselves.
ConcLusion
Getting your workplace pension right is important for employees and their financial future, but also for employers too. Providing valuable benefits leads to happier employees who are more engaged and productive at work. In fact, Research by Oxford University found happier people are 13% more productive!
Author: Tom Conner – Co-founder & Director, Drewberry
Photo credit: StockCake
