Let’s wind things back a bit. In the beginning, Gradgrind and his ilk set companies up to make money, staff were the means of production and that was that.
Over time, it became clear that you couldn’t quite treat your staff like pit ponies and through a combination of Government Regulation and a reluctant admission that there might be a moral element to employment, workers started to get rights and even benefits beyond a starvation wage.
In our enlightened times phrases such as “our staff are our greatest asset” have been polished in the gilded halls that house Human Resources Departments. Throughout the post-war period, a massive attempt was made by UK employers to feather the retirement nest of their workforces. A good company pension was the way to attract and retain the right sort of staff.
The Stakeholder Society of Will Hutton developed a theme that had been latent in such statements, the workforce were a stakeholder in a company’s success and should take part not just in paternalistic pension schemes but in the profitability of the company. Sharesave and other schemes were established and have delivered despite the flat-lining of the share prices of Britain’s major companies.
Coupled to this move from paternalistic pension plans to participative S plans came a sense that the pension plans themselves should empower staff rather than protect them. Early justifications for moving to a DC approach were based on just such principles and assumed that DC participants would jump at the chance of being masters of their retirement destinies. Little thought was given to the mechanics of accumulation, let alone how the money built up in DC pensions and Sharesave could replace the defined benefits that so simply replaced the workforces pre-retirement wage.
It is as if a bridge had been built without a ramp from bridge to shore . People have to make their way from bridgehead to safety using their own resources though the cost of completing the bridge is minimal relative to the benefit it would bring.
But for companies to want to complete the bridge – provide their workforce with the means of converting “wealth at work” to a stable replacement income in retirement needs a paradigm shift in the practices of Human Resource Departments.
Currently HR is obsessed by the employee value proposition – you can smell obsession when an acronym (such as EVP) is in circulation – and EVP is in circulation! The metrics that gauge EVP are “at work metrics”, eg they measure the satisfaction of the current workforce about current happiness. It does not measure the well being of the retired workforce and EVP is skewed towards the younger workforce who properly are seen as the workforce not just of today but tomorrow.
Consequently, the well-being of those approaching retirement is considered secondary, in terms of EVP to nurturing the youngsters, the Sharesave plan dominates the pension plan , ISAs are favoured over annuities and jam today is spread over the stale bread of tomorrow’s retirement.
This is not healthy nor is it commercial. The long-term advantages of treating workforces properly were demonstrated by the growth of the great British employers of the twentieth century, stalwarts such Unilever, Shell and British Gas. These firms built their Employee Value Propositions not just around their current workforce but around their retired staff. These retirement communities validated the EVP to their children and grandchildren. It was around these senior retirees that these companies built their reputations as employers.
Today’s companies will not build EVPsin quite that way. Even the Unilevers have largely abandoned cradle to grave benefits. But neither Unilever or the micro-employer need abandon their alumni, especially their retired alumni. The opportunity exists for employers in the UK to provide huge value by completing the bridges they have built. They can do so by establishing “At Retirement” programs which help their staff turn their hard earned savings into pensions, manage their cash, deal with the issues of older age and take charge of the final thirds of their lives. It costs companies next to nothing to provide this employee benefit and boy would they be doing everyone a favour.
- The case for doing nothing (henrytapper.com)
- Workers Uninformed About Pension Plans (money.usnews.com)
- Should employers be bothered about their pensioners? (henrytapper.com)
- Work is boring, saving’s boring! (henrytapper.com)
- When “two sevens clash” (henrytapper.com)
- Scheme Pensions aren’t the magic bullet -yet (henrytapper.com)
- Feds launch tour to talk pooled pension plans (ctv.ca)