Haven’t employers done their bit?

pension capacity

Employers have a right to feel put upon.

I hear that the Pensions Minister is disappointed that large employers are not interested in delivering pension freedoms to retiring staff.

If he believed that employers were prepared to take on responsibility for employees financial wellbeing post retirement, he has every right to be. Employers are showing no interest in delivering the pension freedoms either from their own schemes, or from new workplace pensions or even from financial education signposting post-retirement options.

From conversations I have had with employers , there appear two reasons for their scepticism.

1. concern that what might start out as assistance, might end up another promise sitting on the balance sheet.

2. fatigue at being the portal for the delivery of one pension bail-out after another. Witness, the pension orders that ensure pension fund members interests come before those of the shareholder (or management), the imposition of the Real Time Information and Auto-Enrolment projects and finally the compulsion to fund workplace pensions for all employees and many contractors not even on payroll.

Staff still trust employers to deliver  benefits in a trustworthy and independent way. There have been blemishes since the disaster of Maxwell, but they have been very few and far between, examples of employers failing to deliver on benefit promises in the past few years are remarkably rare.

Despite this, employers stand to be publicly named and shamed if they do not comply with auto-enrolment regulations. Employers are forced into struggles with the Pension Regulator to implement corporate strategy. Employers are required to rewrite their reward strategies to accommodate compulsory pension contributions

Put like that , it’s not surprising (however disappointing) that employers are not showing much interest in getting involved in their staff’s later life financial planning.

Is the goodwill of employer’s running out?

But there is another way of looking at this problem.

Employers, especially large ones, have invested so heavily in building up pension rights for their staff, that to spoil the ship for a halfpenny worth of tar might be considered both churlish and self-defeating.

Can the goodwill run out?

To answer the question, we need to fully understand the complex nexus of motivations that drive those at the top of our large employers. Money is only one factor, respect, recognition and even philanthropy drive executive behaviour. It is too simple to take sides.

The moral compass that guides board decisions may not always be true but its polarities are rarely reversed. It is set and maintained by “give and take” and many employers are arguing right now that there has been rather more giving  to the Government’s welfare programmes than there has been taking  from the Exchequer.

It is very difficult to see how any of the major pension programs the Government has embarked upon can be seen through without the support of employers. Putting aside reforms to state pensions (which may have to be paid for by future employment taxes), the major immediate concerns are mass disobedience over auto-enrolment minutiae, a revolt against back door compulsory pensions and a refusal to involve themselves in signposting the new pension freedoms.

The future of the CDC project is particularly in jeopardy if employers  walk away from responsibility for the outcomes of the schemes they operate.

 Employee power

There is a final element to the employer’s dilemma. The workforces of may employers are ageing , job mobility is in decline and employers can no longer retire staff at a set retirement age.

Taken together , these three new factors have transferred power from employers to staff. Staff not only have the freedom to take their pension as they wish, they have the freedom to dictate how and when they retire.

The transfer of power from employer to employee, is again the result of Government intervention. But the social consequences of a breakdown in the contract between employee and employer at retirement could be so serious as to damage the thing the Government find most precious, the grey vote.

 A job for a future Government?

Government, and by that I mean whatever emerges post May 2015 may have no choice to revisit the system of incentives by which it manages the behaviour of large corporates and the smaller employers who take a lead from them,

A failure to win back the goodwill of large employers could herald the unravelling of the entire employer-centric welfare strategy on which so much is staked.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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