With the ongoing challenges around the rising cost of living, pensions are likely to suffer if workers feel too financially stretched to keep their pot topped up.
Providing a workplace pension is a legal requirement for all UK businesses since the Pensions Act 2008 was legislated. When starting a new job, employees are typically signed up to the company’s ‘opt-out’ automatic-enrolment pension scheme, designed to make it easier to start saving for retirement almost immediately.
It is estimated that 10.4 million people are now using these schemes, according to data from HMRC, but as reported by Unbiased.co.uk in March 2022, the average person saving into a pension paid in around £200 less last year than they did in the previous year.
Perhaps you’ve seen the Department for Work and Pensions TV ad that shows a restaurant chef assisted by her ‘mini-me’ – a reminder that if you’re employed, you can rely on your company to be looking after you now, as well as in the distant future. But as an employer, are you doing enough to support your employees in their pension journey?
Why are pensions an important part of talent attraction and retention?
Increasingly, pensions are a selling point for companies looking for new talent. In a market currently flooded with jobs and not enough candidates, an attractive pension can make all the difference between a potential employee applying for a role in the first place.
What’s a standard rate to offer?
According to The Pensions Regulator, the current minimum contributions that employers must pay into their staff’s pension scheme is three percent, while employees must pay in five percent. But with many companies now focusing on improved benefits, top end roles are offering to match employee contributions up to 10 percent.
Which sectors offer the highest pension payouts?
Many professions carry wildly different pension expectations. In January 2022, The Sun reported the jobs with the highest pension payouts. On their top-eight list:
Teachers £46,000
Armed forces £41,000
Politician £34,000
Town planner £29,500
Police officers £28,000
Firefighters £20,000
NHS employees £14,500
Tax inspectors £13,000
Money & Pensions Service: best practice
The Money & Pensions Service (MaPS) is an executive non-departmental public body, sponsored by the Department for Work and Pensions.
Within their guidance, key pension resources that employers should provide their workforce includes access to:
Auto enrolment, and information about the impact of leaving the workplace pension scheme
Retirement calculator
Retirement advisory directory, regulated by the Financial Conduct Authority
Guidance at key life stages
Access to pension information is changing, with the introduction of the Pensions Dashboard Programme, established by MaPS. Chris Curry, Principal of the Pensions Dashboards Programme, said the vision is: “To enable individuals to access their pensions information online, securely and all in one place, thereby supporting better planning for retirement and growing financial wellbeing.”
How can employers help staff feel more in control of their pension?
MaPS offers financial wellbeing in the workplace advice for employers to help them support their staff in ways that fit the individual’s needs. It’s all about helping people to feel confident and empowered in their financial decision-making. MaPS suggests that:
Most employees believe there is a role for their employers in supporting their personal financial wellbeing, and only one in five are satisfied with the efforts their employers have made so far to help them manage their finances.
Employers are uniquely positioned to deliver money guidance at moments when their employees most need help. They are often engaged with many of their employees’ key life events, including starting work, changing jobs, becoming parents and retiring. As such, employers are well-placed to offer structured guidance and timely signposting to their staff.
The Pensions Regulator: best practice
The Pensions Regulator (TPR) protects the UK’s workplace pensions, ensuring employers, trustees, pension specialists and business advisers can fulfil their duties to scheme members.
They state that if your business has an automated system, your payroll system or provider needs to calculate contributions and make the correct deductions from staff pay. You should also make sure your payroll system is compatible with the chosen pension scheme. If you’re unsure, contact your payroll provider.
Paying contributions
You need to pay your contributions to your staff pension scheme on time. This includes calculating and deducting contributions from your staff’s salaries. You must agree the due dates for paying contributions to the scheme with your trustee or provider.
The law requires that when you deduct contributions from your staff’s pay you must pay these to your staff pension scheme no later than the 22nd day (19th if you pay by cheque) of the next month.
Keep a record
You must keep information and records about what contributions you pay to your pension scheme for six years, in most cases. This will help you ensure the correct contributions are paid and provide evidence if there’s a dispute.
Records you should keep include staff gross earnings and staff and employer pension scheme contributions due to be paid (and if different the actual amounts paid).
Remember, if you fail to contribute to your staff pension scheme correctly or on time, you risk being fined by The Pensions Regulator.
More information
Clear communication around the benefits of joining a workplace pension is key and can be a game-changer to attracting and retaining talent. Outline the details of your pension scheme in the job description to encourage applicants and follow through with guidance at onboarding stage.
On 1 June 2022, the Pensions Policy Institute (PPI), an educational, independent research organisation, updated their 65-page unbiased guide to the UK’s pension system. Amongst a host of topics, the downloadable guide covers automatic enrolment and types of pension scheme.
For further advice on how to attract the best candidates to your team, get in touch with one of our expert recruiters.
