Pensions experts have highlighted the effectiveness of a total reward model in giving employees a positive attitude towards pensions under auto-enrolment, revealed a report released today.
Under the model, an employer uses all of the benefits tools available to them to attract, motivate and retain staff. The approach is often underpinned by a strong communications campaign.
Survey findings: in figures
A quarter of respondents at a company without total reward did not know how much their employer was contributing on their behalf, compared to 10% that were
Almost 17% in the first group did not know how much they were contributing themselves, compared to 8% working in a total reward environment
Those at an employer that did carry out the approach were much more likely to understand the tax advantage of pensions
Employees surveyed at companies that have adopted this model were 20 per cent more likely to pay in at least 4 per cent of their salary to the company pension scheme, according to research commissioned by consultancy Thomsons Online Benefits and conducted by the London School of Economics and Political Science.
Before the government launched the AE reforms, there were concerns that even if workers were educated about pensions, they would still not be compelled to engage with employers about the matter.
Kevin LeGrand, head of pensions policy at Buck Consultants, said the report showed that this was not the case for a lot of people.
“What this does demonstrate is that people are likely to – once they understand – take the right decisions and take actions [in relation to their pension.]”
The report also highlighted that where a total reward approach was taken, employees were 17 per cent more likely to be a member of their scheme irrespective of salary, compared to those that were at a company that did not.
In addition, total reward respondents were 13.9 per cent more prone to save what they felt was enough or what they could afford.
Mark Pemberthy, director and head of auto-enrolment at JLT Benefit Solutions, said good communication was usually a feature of a total reward approach.
“Crucially, we have also found that the technology used to deliver these strategies also provides a convenient way for employees to action their decisions.
“However this doesn’t have to be unique to employers who operate total reward models and providing members with easy access to relevant information and a convenient way to take action are worthy objectives for any employer or trustee.”
Utilising technology
Using multiple media channels is also a good way of reaching staff, such as a smartphone-optimised website and tablets that staff can visit in or out of office hours, said Michael Whitfield, chief executive officer at Thomsons Online Benefits.
“By using a variety of different formats, the HR department can help educate and guide their employees to a better retirement outcome,” he added.
The report surveyed 454 respondents where a total reward model was used and 500 respondents that did not operate one. The research was conducted between January and March 2013.
Andy Cheseldine, partner at consultancy LCP, said there was no doubt communication was key in educating employees about the reform, but stressed the importance of conveying the right information.
“You need to make sure you are engaging in the right way and you’re not trying to teach people to be an investment manager; you just want them to understand what they have got and what it might give them,” he said.
Cheseldine added that some in the industry have argued ramping up communications later, when there is more money in the pot, could be an effective approach.
“If you have got £20,000 in your defined contribution pot, you are going to pay more attention than if you have got £20, but that doesn’t mean that you shouldn’t start as soon as possible,” he said.
