Carry on nudging!

nudge

We may just have been nudged.

We’ve been getting  interested in salary sacrifice. We have been building a salary sacrifice modeller into the workforce assessment tool on http://www.pensionplaypen.com by popular demand.

Initially I had thought  salary sacrifice was benefiting employers but following my recent blog on accounting web, I got this tweet.

 

If this is true, (Ceridian are both reliable and one of the major software suppliers to the payroll industry), then this is important.

Auto-enrolment contributions in the first years of phasing are so small they have hardly disturbed the surface tension that maintains inertia!

But we are still in a period of acclimatisation for many employers and their auto-enrolled staff. While  the implementation went well, they are still getting used to the temperature of the water!

But as smaller organisations become more confident, switching to a salary sacrifice arrangement may be the next stage in the process.

And we are very much in virgin territory now.

Those who think that DB provided universal protection to workforces large and small are kidding themselves. DB take up was typically targeted at  higher earners and those  with low but stable earnings were often disadvantaged if they did join by offsets which depreciated the value of benefits.

Most of the employers still to stage auto-enrolment have never offered a DC let alone a DB plan to staff so any pension contribution is a step in a new (and to many dangerous) direction.

If we can encourage employers to go the extra inch by adopting salary sacrifice, if it gets them and their staff engaged in the workings of pension contributions, then we are another nudge closer to an adequate contribution.


 

This is how you boil frogs, turn the heat up slowly and eventually you can turn it up faster.

Frog-b0iling may not be as politically acceptable as nudging but it comes down to the same thing. To get to adequate pensions for all we need to nudge and keep nudging and we needs always be careful not to alarm the frogs who still have the energy to jump out of the pot.

frog

 

 

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in auto-enrolment, Payroll, pension playpen, pensions and tagged , , , , , , , , . Bookmark the permalink.

1 Response to Carry on nudging!

  1. mark5000910 says:

    Henry

    A typically thoughtful and interesting article – thank you.

    However, re: the claim that “Those who think that DB provided universal protection to workforces large and small are kidding themselves. DB take up was typically targeted at higher earners …”

    Okay, DB didn’t provide protection (I take it you are referring to the collapse of many Schemes where Members were left with nothing – Maxwell et al – but these were criminal acts and not typical). What most DB schemes provided was certainty, which is what employees and paternalistic employers at the time wanted. Employers also found that they were a relatively painless mechanism to help reduce the size of workforces through enhanced early retirement arrangements as we began de-industrialisation under the Conservative Govts of the time.

    These days, we would both agree that career patterns are different and people expect to change jobs regularly, but back thirty years ago, most people did not. (Although interestingly, I am often told that many people do not change jobs now as much as I think, but whatever).

    When we designed and introduced DB Schemes, we was not targeting them “at the higher earners”, but were rather considering the certainty DB Schemes offered, the flexibility they offered in terms of funding (you remember when DB schemes cost Employers nothing, thanks to surpluses!) and the equality of the offer (all employees were enrolled compulsorily into the same Scheme, with the same accrual rates [mostly!]).

    The joint governance of many of these plans (with Employer and Employee reps) also reflected the changes in industry at the time in terms of the joint management of enterprises by Company and Employee reps through Works Councils.

    It was the Conservative Govt. that ended compulsory enrolment into Schemes and the introduction of “personal pensions” – it was these that were targeted at “high earners” and this meant that Director/Trustees left the Schemes that their companies sponsored and they jointly-managed, and thus began to view their company pension schemes as company assets to be stripped.

    Kind regards

    Mark

    Mark Law E-mail: marklaw50@gmail.com Cellphone: 07850 717 186

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