Asos staff to have choice between pension and Lisa

The offering will combine automatic enrolment-compliant pension provision with a range of other products including the Lifetime Isa and entire Isa family.

Auto-enrolment has been hailed as a success story of recent government policy, but studies have suggested that for younger generations, debt and short-term savings needs still pose a threat to overall financial health.

If you don’t understand your employees’ goals or aspirations, you risk creating something that doesn’t engage them well

James Haggon, LCP

Asos’s new reward package aims to help employees tailor their savings to their personal needs, by splitting their goals into short, medium and long-term targets.

In a bid to increase engagement with these goals, the retailer gave them emotive labels such as ‘turtles hatching on the beach’ – used to describe a retirement filled with the experiences staff dream of in their working lives.

Member preferences taken into account

Back in the more mundane world of product selection, Asos envisages this income being provided via a diverse set of savings products.

Isas, investment accounts or cash income could deal with obligations arising in the short and medium term. Specific medium-term goals such as buying a house will be funded through a Lisa or share plan, with retirement secured by a pension or ‘other’ provision.

Employees will still have to contribute to their pension at the minimum level prescribed by auto-enrolment, although contribution levels have not yet been set. Asos also plans to offer a debt consolidation service to staff.

James Haggon, a consultant at LCP who worked with Asos on the proposition, said the decision was reached after careful consideration of member needs.

“If you don’t understand your employees’ goals or aspirations, you risk creating something that doesn’t engage them well,” he said.

Haggon said a number of interesting propositions had been received, with a decision likely to be made in the coming weeks.

He added: “[Asos] recognises that everyone has different savings goals throughout life.”

Flexible solutions are gaining traction

Asos, which was named the top company UK professionals want to work for by social media platform LinkedIn, is under more pressure than most firms to offer market-leading reward packages for its staff.

But some in the industry see flexibility as a key component of effective savings. The Lisa was brought in by former chancellor George Osborne, with the aim of helping young savers navigate the competing aims of house purchase and retirement provision.

More recently, the Royal Society of Arts called for the idea of sidecar savings, a flexible prototype developed by master trust Nest, to be brought to market for the self-employed.

Industry not convinced

However, others have concerns about the impact this flexibility might have on pensions adequacy.

Sir Steve Webb, director of policy at provider Royal London, said he welcomed the introduction of flexible programmes, as long as steps are taken to ensure staff are “maxing out on employer pension contributions and that sort of thing first”.

The relatively strict rules around products such as Lisas should help avoid a huge dilution of pension contributions, said Webb.

But he urged companies to remind employees that they need to save more than the auto-enrolment minimum before thinking of other goals if they are to have an adequate retirement.

“We know that 8 per cent is not enough for people, it would be quite worrying if a company says, ‘the government thinks 5 per cent is okay’,” he said, arguing that the government should clarify its “mixed messages” by considering future phased increases.

Haggon stressed that Asos is launching an engagement drive to make sure savers do not fall into these traps.

Maintain separate products

Nigel Peaple, deputy director for defined contribution, lifetime savings and research at the Pensions and Lifetime Savings Association, agreed pension adequacy must not be the price paid for saver flexibility.

The PLSA is examining consultation responses on how to improve short and long-term financial health.

“There is a pressing need in the UK to raise saving in both areas,” said Peaple.

“Our initial view is that, until it is certain these two types of saving can be incorporated into a single product without [one] undermining the other, it is better to address them by separate mechanisms and products.”