By Dale Critchley, Workplace Policy Manager, Aviva
While the motivations varied, they all pointed to the same conclusion: employers believe they receive a return on their investment in workplace pensions.
That led me to reflect on the connection between pension adequacy and employer outcomes. The stronger the retirement outcomes a workplace pension can deliver, the greater the potential benefit for the employer.
A pension scheme that simply meets minimum requirements fulfils an important purpose, but it is unlikely to differentiate an employer in a competitive labour market or provide many employees with the confidence to retire comfortably. In contrast, schemes that help employees build meaningful retirement savings are more likely to support wider business objectives.
When people feel financially prepared for retirement, they are better able to make choices about their future with confidence. A pension that is seen as valuable can also help employers attract, engage and retain employees, strengthening their employee value proposition.
The most direct route to better retirement outcomes is often higher contributions. The Pensions Commission has highlighted the challenge posed by minimum contribution levels, but increasing contributions can be expensive for employers and employees alike.
The Commission will be carefully considering how to improve minimum contributions, but there are ways to make higher saving levels more achievable today. Salary exchange arrangements, effective contribution design, targeted saving campaigns and approaches such as "Save More Tomorrow", where employees commit part of future pay rises to pension saving, can all help improve outcomes and differentiate an employer’s offering.
Investment performance also plays a significant role. Strong governance and regular oversight can ensure default investment strategies remain aligned to members' needs and are working as effectively as possible.
As employees build pension wealth, support becomes increasingly important. Encouraging engagement, helping people develop a plan for retirement and making guidance and advice available can all improve decision-making throughout the retirement journey.
We often talk about the need for individuals to engage with their pension savings if they are to achieve better retirement outcomes. But employers have an equally important role to play. When we look beyond compliance, an employer's return on investment is closely linked to the retirement outcomes achieved by its workforce. A well-designed pension scheme, supported by effective communications and employee support, should be viewed not simply as a cost, but as an investment in both people and the long-term success of the business.
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