In depth: three reasons why the unions are good for auto-enrolment

The landmark deal struck in Australia between unions and employers in 1992 was for employees to forgo an annual pay rise for the following year in exchange for the creation of an employer contribution to their pension.

Education

Inertia is all very well, but there is an obligation to provide employees with education on the financial necessity of auto-enrolment. Unions believe they are best placed to do this, as employees are less suspicious of being encouraged to buy a financial product if a trade union supports it, than if a provider, IFA or employer alone is encouraging them to do so – that, at least, is the party line from the unions.

Nigel Stanley, head of campaigns at the TUC, says: “People may not understand pensions, but when people they trust to be on their side say ‘join’, the majority will sign up. And that must be valuable given that trust can be a scarce commodity in the pensions world.”

Some of the best education on pensions has been carried out by retail workers union Usdaw. John Hannett, general secretary, says: “We have produced literature for our members that gives the basic facts about what the changes mean and how it will affect them in a clear and easy to understand way.

“We have been communicating with our members on a regular basis via our website and in-house magazines, and email alerts have been sent to thousands of individuals.”

Advice

One of the nightmare scenarios for auto-enrolment has been the fear of people being opted in, who subsequently claim their employer or provider mis-sold them a pension, when they should have been, for example, paying a debt.

Many agonise over the Financial Services Authority restrictions on telling employees what a good thing their pension scheme is too. This holds back employers and providers from telling people what a good deal they are getting. These restrictions do not seem to apply to unions, who are putting out some of the most emphatic messages yet.

A flavour of this comes from a three-minute video created by Usdaw that was sent to its members at Asda, Morrisons, Sainsburys and Tesco, on DVD, and also posted on YouTube. Its emphatic conclusion is: “Financial experts and trade unions agree that company pension schemes are the best investment for retirement.”

Hannett adds that his union has trained representatives to act in roles on pension awareness days not dissimilar to IFAs.

“We encourage our reps to set up a stall in their workplaces in order to provide our members with information about their specific company pension arrangements.

“We have also produced a three-minute DVD that our reps play in the workplace, and this has proved very successful.

“People are often put off from joining pension schemes because they are so complicated – our role is to break down all those barriers to explain things in a way everyone understands, to help people understand the importance of saving for their retirement and, importantly, to let them know they have choices.”

And here is Communication Workers Union secretary Sally Bridge who stated the following to 02 employees, who are being auto-enrolled in March. “Although pensions are not a ‘sexy’ issue, the
company contributions we’ve been able to negotiate for our members in O2 go way beyond those required by law and rank amongst the very best being offered anywhere. For anyone who is already attempting to save in a different way for their retirement, participation in the pension scheme is a complete no-brainer.”

Ensuring members stay opted in

Success regarding opt-outs means different things to different people. For some employers low opt-outs will be a cost burden; for providers it could mean higher profits; for unions it is about achieving higher pay for their members, even if it is deferred pay.

For the pensions industry as a whole, there is the moral incentive of helping people plan for a better retirement and here unions are in perfect alignment.

Tony Lennon, research officer at media and entertainment union Bectu sums this up, saying: “Bectu is encouraging members to think twice before opting out of auto-enrolled pension schemes, because for many of them this is the first time in their working lives they will have had easy access to a scheme with an employer contribution.

“This is particularly true for our many self-employed members, some of whom will, from time to time, be eligible for auto-enrolment due to the length of their engagements.”