All your pensions questions answered

It's increasingly important for employees to save for their retirement – so we asked readers for their burning queries, and put them to a panel of experts

All your pensions questions answered

How do we encourage our staff to save for their pensions without overstepping the boundaries in terms of giving advice? We are a small charity so can’t afford to pay someone to come in and advise. We asked the company that provides our pension to run a session, but they said no.

Helen Morrissey says: The great thing about auto-enrolment is that you have to re-enrol any employees not in the scheme every three years. This includes new joiners and those who have previously opted out. The thinking behind this is that even those who have previously opted out may well remain in the scheme when they have been re-enrolled.

The most powerful thing you can do to get employees to up their pension contributions is to change your defaults. Offering an employer-matching contribution is a great way to get people contributing above auto-enrolment minimum levels. You need to communicate clearly to your staff what you offer and why, as this could have a significant impact on the amount they save for retirement.;

Ros Altmann says: If individuals have large debts or need extra money urgently in the next few years, the money in their pension will not be available to them. However, if you save more than the minimum, you should get top-ups to your pension fund from the government, which is rather like ‘free money’.

So the best thing you can do is ensure employees have access to websites that explain the benefits of pensions and also ask your provider to signpost information that you cans end out that helps them understand the advantages, as well as the risks. Then it is up to them to decide if they want to put in more.

I have worked at three companies in my career so far. I have paid into pensions at each, but I haven’t necessarily kept all the paperwork. When we eventually get a ‘pensions dashboard’, will this solve the problem of how to access my pots and know how much I have saved?

Amanda Burden says: It is important that any previous pension scheme has your latest contact details. You should contact previous employers and ask them for details of any benefits as soon as you can. It will help if you provide the time period you worked for them. If you aren’t sure who to call, the government provides a Pension Tracing Service.

Initial models of the ‘pensions dashboard’ are due to be developed and tested this year. But the current expectation is that the majority of pension schemes will be ready to go live with their data within a three to four-year window, with a phased staging plan. So it may be a number of years before you have access through the dashboard to the information you need.

What are the really important factors in choosing a pension provider, and how much should we take the charges into consideration?

Nathan Long says: We tend to find most employers will have three types of employees: those who are really engaged with retirement saving, those who are interested but need the right help to turn interest into positive action and those who aren’t interested at all. The challenge for employers is to provide a pension that helps all these groups.

It can be tempting to rush to a provider offering you the lowest cost, and a change to a lower-cost provider is rarely going to receive much employee pushback. But this only addresses the cost side of the debate, ignoring the value element altogether.

To extract the most from their pension spend, employers should understand the track record prospective providers have in helping employees take positive action with their pension. Understanding how engaged pension members are will help you work out how valuable the pension will be as a reward and retention tool.

Ask would-be providers how many members log in at least every 12 months, whether they’ve voluntarily increased their contributions, and whether they’ve transferred into other pensions. It’s also important to find out how many members are choosing to change their investments to suit their own circumstances. Measuring the outcomes rather than relying on the tools providers claim boost interest is crucial, as this extra information can give you a well-rounded opinion.

Successful pension saving is all about starting young and playing the long game. How can we help our people set targets for their pension savings? How can we make those targets real but not scary?

Saq Hussain says: Leveraging workforce data can help an organisation build a better understanding of who its pension scheme members are, allowing it to customise communications to suit individual needs and preferences. Location, average salary, age, sentiment or engagement and time at a company can all help develop ‘personas’ that allow businesses to get under the skin of how employees really think and feel. Then you can design targeted communications that are more likely to inspire people to take action.

Gamification and immersive experiences can also be used to engage members in an innovative, fun and collaborative way. Members or teams who actively manage their retirement can earn points and move up through leaderboards. You could even use tools like virtual reality to help immerse people in their future selves and visualise their retirement.

While setting targets for 30-40 years’ time is, for many people, likely to mean aiming for an amount they may feel is unachievable, it’s important not to hide from the fact that, for people entering the workplace today, their retirement life may be almost as long as their working life. Paying a few extra pounds per month now could have a significant impact on retirement.

Like a lot of employers, we make enhanced pensions contributions for our senior staff. Will we eventually be forced to bring them into line with the rest of our employees, and how would we begin calculating the level of compensation our execs would receive if this was the case?

Stephanie Windsor says: The 2018 UK Corporate Governance Code, which applies to all firms with a premium listing, requires pension contribution rates for executive directors, or payments in lieu, to “be aligned with those available to the workforce”. This has largely been addressed by the reduction in the annual allowance applied to high earners since April 2016.

A number of employers have introduced a ‘pension allowance’ in lieu of the contribution the company was making. This would be available for all employees who find their pension contributions restricted, and would not form part of the employee’s salary so it would not impact on other benefits. An exchange of letters would be provided so the employee was aware pension legislation changes could mean the company ceased this payment.

You might want to take legal advice on this, as a solicitor would be aware of any executive contracts and would need to review any promises made previously.

Michael Ambery says: You need to consider the other benefits and parts of the package that an individual can be offered. When we look at executives, it might be that they have maxed out on their pension savings, in terms of the lifetime allowance, so employers need to look at other benefits and structures from a total reward viewpoint. That might mean a completely different, flexible strategy over pay.

You can start to leverage other benefits in your workplace like private medical, group income protection and other additional risk benefits while bringing in flexible perks such as ‘cycle to work’ or additional holidays that individuals might purchase as part of a benefits package. It’s about viewing pensions as part of a whole reward structure.

Our employees often ask whether we as a business are responsible for the pension scheme’s default fund performance. What should we tell them?

Charles Cotton says: You can’t make any promises about how pension funds will perform, but you could highlight how contributions are topped up by other sources. You can explain how employee pension contributions are boosted by the employer’s contributions and that they could also get tax relief from the government. So unless there is a severe and prolonged economic downturn, it is unlikely they would get back less than they put in over the long term.

Additionally, you could mention that the default fund has been designed to spread risk so, while it can’t be avoided, steps have been taken to reduce its impact. And while they can’t choose their default funds, employees can ask to invest their money in a different fund offered by the scheme.

However, you are responsible for selecting a default option that’s suitable for your workforce. If your typical employee is 25 years old, the pension default will have a greater risk appetite than if they are 45. You will be expected to monitor and review the default funds’ performance and their fees, and make any necessary changes.

The panel

  • Ros Altmann, former UK pensions minister
  • Michael Ambery, senior consultant, Hymans Robertson
  • Amanda Burden, head of business development, Pi Partnership Group
  • Charles Cotton, senior adviser for performance and reward, CIPD
  • Saq Hussain, workplace savings and benefits director, PwC
  • Nathan Long, senior pension analyst, Hargreaves Lansdown
  • Helen Morrissey, pension specialist, Royal London
  • Stephanie Windsor, chartered financial planner and partner, One Pension Consultancy