Talking head: Pensions commentator Steve Bee looks at the engagement challenges faced by smaller employers in light of the shift to a more individualist pensions regime.
In the past seven years we have ditched the whole concept of the state providing earnings-related workplace pensions for half the working population, and at the same time the ending of both the disincentive and ignominy of means-testing for older citizens.
We have also seen the beginnings of what we will one day look back on as the individualistic treatment of pension savings as opposed to the collective, one-size-fits-all approach of the past century.
Half the employees in the workforce work for a small number of large employers; the other half work for a very large number of small employers
This latest step is a consequence of the structural changes to the state pension. We could not treat individuals as such with private pensions that were so intertwined with the state pension system and means-tested support.
Our politicians have done a good job. From here, things will become interesting.
We are now about halfway through the process of delivering workplace schemes to all employees; at least all eligible employees. Halfway in that context, though, is highly subjective; how you see it depends on where you stand.
In terms of the number of employees that will eventually be covered by the auto-enrolment requirements, we are almost exactly halfway. But in terms of the number of employers who will be affected we have hardly started.
Half the employees in the workforce work for a small number of large employers; the other half work for a very large number of small employers.
It is among that latter half in smaller firms that we will see the most revolutionary changes, both in terms of individualistic savings and the way pensions are communicated by employers and the pensions industry.
It has been easy for the pensions industry to communicate with its pension savers in the past – although the industry has not done a particularly good job on this front – as their end-client employees worked in large organisations with in-house communications systems in place.
That will not be the case as ever-smaller firms adopt workplace pension schemes.
The industry will need to work both differently and harder, and adapt to a more individual communication and engagement style with scheme members in future. And what is more, those members will demand it anyway.
That will be a real challenge, particularly for a complacent industry that is not had to change that much for nearly half a century.
Steve Bee is CEO and founder at Jargonfree Benefits
