Workplace pensions influenced by attitude, costs, value and risk
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Employer and employee attitudes towards pensions, costs, value for members and avoiding risk are all considerable factors impacting employers’ decisions regarding their workplace pensions and auto-enrolment duties.
These are among the findings of a qualitative research study by the Department for Work and Pensions into employers’ views and behaviours on AE and defined contribution pension schemes.
In a report detailing the findings of the research, the department found a wide range of employer views and behaviours associated with AE and workplace pensions to consider when considering policy changes. This is seen in their approach to contribution amounts, matching contributions and enrolment decisions.
For example, some employers contributed only the minimum and did not promote the benefits of pension saving to their employees. Alternatively, other employers match contributions to incentivise employees to save and organise numerous promotional activities to raise awareness.
When choosing pension schemes, employers consider the resource burden on their company. The department said though financial costs were important, employers were more concerned with the time cost burdens associated with administrative tasks.
“This meant that larger employers, who had more resources to administer pensions, tended to have more positive views of AE, in comparison to smaller employers who felt the costs, financial and administrative, more heavily,” said the DWP in the report.
The scheme’s value for members was also considered in employers’ decision-making process. Employers considered value in a number of ways, including investment returns, ease of communication and support from the pension provider, ie, customer support and the scheme’s flexibility.
The risk to the employee’s pension or to the employer was also included in decision making. For instance, employers viewed that new or unfamiliar initiatives such as small pots consolidation options, alternative funds, collective defined contribution schemes should be optional.
The DWP’s research was conducted from January to March 2022 and consisted of 59 in-depth telephone interviews with employers across a range of sizes, sectors and regions. Other findings of the analysis can be found here.
What can pension schemes and providers do to help employers improve AE contribution rates?
