Small and medium-sized employers who underestimate the value placed on pension benefits by employees are hindering their ability to attract and retain staff, former Pension Protection Fund chair Lady Barbara Judge has warned.
Introducing the findings of a survey by HR and employee benefits platform Hibob, she pointed to a prevailing attitude among small and medium-sized company bosses that automatic enrolment is “just another tax on my business”.
Hibob’s State of the Nation report found that 75 per cent of HR decision-makers share this view, with 66 per cent only doing enough to meet the minimum requirements of AE.
Obviously we’ve misjudged the millennial community, as well as the employee community
Lady Barbara Judge, Hibob
This appears to be driven by the belief that pensions are of little value to staff. Sixty-one per cent of decision-makers thought employees did not care about auto-enrolment, while 58 per cent thought their employees did not really understand the pension being offered to them.
Employees value pensions
However, responses from the 4001 employees surveyed suggested a rather different situation.
Fifty-four per cent said they “needed” a pension, while 37 per cent wanted one. The perceived necessity of pensions is stronger among millennials, suggesting that the cohort are not entirely the spendthrifts that some imagine them to be.
Opt-out rates have to date supported this conclusion, with younger generations typically less ready to leave their scheme.
“I myself, when I was younger was offered a pension when I first came to a British company… I’m very sorry to say I personally didn’t take that pension,” said Lady Judge, but pointed out that most millennials appear to have different priorities.
“Obviously we’ve misjudged the millennial community, as well as the employee community,” she said.
The Hibob chairman added the findings would comfort policymakers worried about opt-out rates, but that it should be cause for employers to reconsider their benefit packages.
“There's competition for good employees, so giving a good package to people in order to bring them into employment is key,” she said.
Will competition force contributions up?
If the survey findings make the case for employers to improve their benefit packages in order to attract and retain staff, the industry remains uncertain of the role legislation should play in establishing new minimum contributions above the current planned 8 per cent.
“You do have to be a bit careful about smaller employers,” said former pensions minister and Royal London director of policy Sir Steve Webb, adding that stretching SME owners further with minimum contributions may make employing staff almost impossible.
“What I’d do is get everybody to the 8 per cent… and then use nudges,” he added.
But Ian Neale, director at pensions intelligence firm Aries Insight, said legislation may still be necessary.
“If you leave it [as] voluntary then there will be a tendency on the part of the majority of employers, for competitive reasons, to revert to the minimum… particularly in the lower-paid sectors,” he said.
