There has been much debate in recent times about the amount of effort employers should be putting into the selection of pension arrangements for their staff. The one extreme holds that employers are not pension experts nor do they have the budget (time or financial) to acquire such expertise. Consequently, employers should ‘only’ seek to meet the minimum requirements when selecting a pension arrangement. The other extreme suggests that expertise should be acquired in order for the ‘best’ scheme to be selected in the circumstances. There are plenty of parties occupying the middle ground between these poles.
One consideration for those making the scheme selection is biblical – do unto others as you would have them do unto you. Would you want to be saving through the scheme you select, particularly if this was the only savings vehicle you had?
Another consideration is somewhat more contemporary. The UK Government abolished the Default Retirement Age in 2011, so people can work as long as they choose to in most circumstances. Consequently, employers might find themselves with staff who cannot afford to retire – particularly in sectors where advancing age does not compromise the ability to fill a role. These employers have a commercial incentive, in addition to any other considerations they might impose on themselves, to try support their employees’ ability to retire at the time they would like them to retire.
An exchange that I have seen quoted goes as follows: “What if we invest in our people and they leave? What if we don’t invest in them and they stay?”. These considerations apply as much to pension provision as to training, facilities and other areas of workforce support and development. The investment in pension provision involves not only the selection of an appropriate scheme but also the level of contributions to the scheme as well as education to help staff plan for retirement. Falling short on investment in any of these three areas is likely to result in staff staying for longer than is desired, with a corresponding impact on the performance of the business.
A cheap and cheerful pension arrangement might well be appropriate for a particular workforce. However, simply checking the boxes, particularly to meet Auto-Enrolment minimum requirements, is potentially an expensive decision for the business in the long-term. Why not assess the appropriateness of the pension arrangements with due care and diligence, as early as possible? This effort could turn out to deliver a significant return on investment.