What are the building blocks of a good Pension

Cast your minds back to 2012.

Her Majesty The Queen celebrated a Diamond Jubilee, London basked in the glory of hosting the summer Olympics, and Monty the giant schnauzer went global in New Zealand for his ability to drive a car (don’t believe us? Google it).

But amongst all of the comings and goings, the United Kingdom was also busily preparing for Pension auto enrolment.

Requiring all employers (even those with a single employee) to automatically enrol eligible staff into their Pension scheme while making contributions, it changed the landscape of the workplace retirement fund for good.

Larger companies, naturally, were some of the first to roll it out, with minimum contributions of just 1% of salary for both employee and employer, known as qualifying earnings. Since the early days, qualifying earnings have risen to a minimum of 8%, with employers required to contribute a minimum of 3%.

Most companies have a default investment fund, offering employee options around increasing Pension contributions. Some are utilising salary sacrifice, and some are changing investment funds and the ability to add beneficiaries in case the worst happens. But what does a good Pension scheme look like?

During our recent webinar, Matthew Gregson, Executive Director at Howden Employee Benefits, told Zest what the building blocks of a good Pension are.

‘There are two lenses through which we all need to think about what a good Pension looks like.

We have what it means for the employer, and then what it means for the employee. The real success is marrying those two things together, hitting a sweet spot that ultimately satisfies the needs of both audiences.

Firstly, through the employer’s lens, decision makers and administrators within a company are ultimately responsible for their employees’ Pension. A good Pension for an employer is one that supports your Employee Value Proposition (EVP). It helps you attract, motivate and retain the top talent you need to drive the success of your business.

That needs to be balanced against the fact that your Pension offering needs to be:

• Affordable
• Low risk
• Comes with a low administration burden for you as the employer

Part of what makes you a compelling employer is not having to spend too much time or money on it. That’s the real sweet spot we want to hit as employers.

For employees, a workplace Pension means something different. A good Pension is one that gets them to a good retirement outcome.

Ultimately, retirement nowadays is a very varied and complex landscape for all of us. If you think about it personally, and what your retirement might look like, for how many people there are in a business, there can be that many different scenarios. Certainly, we don’t just have a waterfall moment where we ‘fall off a cliff’ one day, stop working and start our retirement by drawing on a thing we call a Pension to provide our income.

However, when you look at it in reality, the vast majority of us are going to need our income to come from a Pension. There’s a huge reliance on it, and so when it comes to what we need as employees, what do we need a Pension to be?

• We need it to be well funded
• We need the investments to perform
• We need it to grow well
• We need low charges – So as little of that growth is taken as possible by the Pension providers for the services they offer
• We need clear income options at retirement to help make sure we make the right choices as to how we call on our fund when the time comes.

These are the building blocks that you need to think about as employers when delivering to your people. The contribution rates, the providers you choose and their performance and charges, and the options they give to your people.

We ultimately arrive back at that sweet spot. The balance of responsibility lies between the employer and the employee. It’s going to drive how much you believe you need to take the lead on how well funded it is, and how well employees engage with your scheme.

In reality that is the biggest conundrum that most people need to solve when thinking, should we pay more? Should we change providers? Should we invest in better education and guidance for our people?’

In for a penny, in for a pound!

Whether or not you think ‘money makes the world go round’, when it comes to retirement, it’s certainly within an employee’s best interests to save for a rainy day.

Amongst your flexible benefits offering, the ace in your pack when it comes to employee rewards is most certainly your Pension. And to say that a good Pension is important is most certainly an understatement.

After all, as things stand, the maximum new state pension for those aged 66 is £221.20 a week. Hardly fills you with confidence, does it?

While some might see that as a helpful amount, could you cover your day-to-day living costs with just £11,500 each year? It’s easier said than done, so it’s imperative that a workplace Pension scheme is key to company benefits schemes across the board. From the amount you contribute as an employer to the way you educate employees, a good, rounded Pension scheme can be key to talent attraction/retention.

As an award-winning employee benefits provider, Zest take pride in the way employees engage with our technology. After all, we’re championing a new era of engagement.

Through our dedicated benefits portal, employees can check the current amounts they are contributing by viewing their pension details.

If an employee is already auto-enrolled into a pension benefit and has access to the employee portal, they will also be able to view their benefit details in the usual way via:

• Benefit tile links on the homepage
• My Benefits

The employee will be able to see when they started making contributions, the contribution from themselves and their employer and how the contribution amount is being deducted from their salary.

If the pension benefit is within an open window which allows amendments, the employee will be able to update their contributions by simply selecting or typing the new contribution amount in the Employee Contribution field.

What’s more, our Pension overview updates in real-time, showing the impact of their changes to their overall package immediately, just like it does on the Total Rewards Statement.

A piece of cake

Remember, Zest connects seamlessly with the HR, payroll and benefits providers you use, saving employers time while also reducing admin.

Save time and money by:

• Automating your benefit selections
• Generating provider reports at the touch of a button
• Scheduling your reporting needs
• Delivering reports to the right people
• Connecting all of this to your existing systems

Remember, there’s no need to wait for the reports you need, and definitely no extra charges. Through our platform, you can access all of the reports you need instantly, rather than having to have someone at our end do it for you!

All of this will help you to make the ‘all important’ smart details. Zest provides a treasure trove of valuable insights that HR and benefits teams can report on in seconds. Understand which benefits are popular, which ones aren’t, how much it all costs, and what you’re saving on national insurance.

To find out how Zest can play host to your Pension offering, book a demo today.