Have to – Need to – Good to
At AgeWage we define “responsibility” in three ways, – “have to” – “need to” and “good to”. Employers do not have to assist members in getting the most out of their workplace pension, they may feel they need to – if only to get shot of them – and a few employers feel a moral impulsion that it would be good to help staff as best they can.
So employers have no responsibility for staff’s welfare post retirement and most employers shy away from taking it. More than 1m employers offer workplace pensions in the UK and those that take the workplace pension seriously is – according to research by Pension PlayPen, around 15% of that number. But this hardcore of employers see pensions as part of a reward strategy, rather than just compliance with pension law.
AgeWage was formed to meet the needs of employers who want to know the value they are getting for the money they are putting into pensions. We do not – as our sister company Pension PlayPen does, look at subjective elements of workplace pensions – the payroll interface, at retirement service or scheme governance ((important as these are). We focus instead on the value of each member of staff’s pot relative to the contributions paid and the timing of those contributions. Once we have measured the member’s internal rate of return we compare it with a benchmark , created in association with the ratings agency – Morningstar to give each staff member’s pot a score.
Employers can see the scores of staff (usually anonymised) and see average scores for their scheme. This management information enables them to assess whether the scheme is working better or worse than average with quantitative measures that cannot be challenged by providers. We have found many reward departments need to do this measure how their reward strategy is doing and this scoring system is preferred to the opinion of a consultant. The scores are factual
If employers think it “good to”, they can allow members access to their individual scores . There is of course a risk to this, some employees will find their plans have delivered low scores. Typically this will be because they have chosen their own investment strategy which has underperformed the average but sometimes this may be down to bad luck- the timing of a lump sum investment such as a transfer, or bonus sacrifice that was invested on the wrong day.
We appreciate that many employers will feel that the transparency that the AgeWage scoring system offers – is too much of a risk and may not offer staff access to their own scores but we believe that progressive employers will not just offer staff scores but offer the support needed to explain them. AgeWage is planning to deliver this support service as the next stage in its development.
Providing outcome based reporting to employers is still in its infancy, but as workplace pensions grown in value, so do their importance to staff’s financial planning. So AgeWage has a great future ahead of it!