Craft brewer Brewdog has introduced a higher contribution for members of its defined contribution scheme in an ambitious bid to create a best-in-class employee benefits package.
Encouraging employees to save into a pension scheme has become more pressing with the rise of DC and a rollback of the kinds of income guarantees associated with defined benefit.
The Scotland-based brewer has 387 members enrolled in its Old Dogs Fund. New joiners begin on statutory minimum contributions, rising to a default employer contribution of 6 per cent after six months. But under the new plan employees can contribute 5 per cent to receive a double-matched employer contribution of 10 per cent.
The increased contribution is available as part of the company’s enthusiasm to become “the best employer ever” and member feedback will be used to plan further improvements.
The quirky company’s ‘marketing Viking’ Mimmi Hetorp said: “We’re looking forward to seeing how staff use the new pension scheme and will find out from them what they’d like to see in further improvements.”
DC as benefits centrepiece
Research released last week by provider Aegon, looking at a sample of 508 pension-paying UK businesses, shows around nine in 10 companies already contribute more than the auto-enrolment statutory minimum, with the most common contribution rate being 5 per cent of earnings (see graphic).
It also shows that increasing employer contributions to 5 per cent from 1 per cent can increase by one-fifth the number of workers who pay above-minimum contributions.
The freedom and choice reforms allow savers access to a wider range of options at retirement, ending the effective requirement to buy an annuity.
The freedoms have also shifted perceptions of pensions as a part of the employee benefits package. Damian Stancombe, partner at consultancy Barnett Waddingham, said pension managers were increasingly considering pensions as one part of a larger whole.
However good your governance is, the crux of having a good outcome in retirement is based on your contributions
Damian Stancombe, Barnett Waddingham
He said: “I’ve had a couple of conversations with [companies] recently who are encouraging people to put contributions in [up] to the matched level, but almost suggesting putting more money in doesn’t make sense. I think there’s a reassessment of how pensions are working.”
Despite this, employers are acknowledging the importance of engaging members with their scheme and encouraging saving as an important factor in ensuring a comfortable retirement, Stancombe said.
“However good your governance is, the crux of having a good outcome in retirement is based on your contributions,” he said.
Alan Morahan, head of DC consulting at Punter Southall, said an obvious step towards this would be the introduction of “save more tomorrow” initiatives – optional increases in workers’ contributions following pay rises.
“We should look to see more of that concept being put into place,” he said, adding: “Outside of that, it can only ever be around how the whole thing is communicated.”
