What’s the impact of longer working lives on an employer’s benefits scheme?



A recent YouGov poll for the Department for Work and Pensions (DWP) (the full results of which can be found here) showed that the main reason for continuing to work was ‘needing’ to earn money (31%). This statistic resonates with our work with employers. 

Since it has been unlawful to force people to retire unless there are objectively justifiable reasons for doing so (age discrimination), people continuing to work beyond traditional retirement age are becoming a primary consideration for businesses when it comes to succession planning and the provision of benefits.

The fact that nearly half (49%) of those polled now think that they will retire later than they thought they would goes to suggest that this issue is something that is likely to gain momentum.

The key questions from the employers we work with are: “how can our benefits package accommodate the diversity of our workforce?” and “how do we pay for it?”.

The cost of employee benefits can escalate (sometimes rapidly) as cover is provided beyond a traditional retirement age.  As a result, many employers utilise the exception to the principle of equal treatment on the grounds of age for group risk insured benefits, while other employers continue to fund ongoing insured benefits.

As the responsibility appears to continue to shift from government to employer, and then on to employees to fund benefits, it is likely that the use of flexible (and voluntary) benefits will continue to grow at a pace.

 
Whatever the future holds, making sure that employees fully understand and appreciate the benefits on offer is key to an employer’s staff reward and commercial success.

Robin Watkins

Risk & Flexible Benefits Consultant

Telephone: +44 (0)20 7893 3456
Email: contactus [@] broadstone.co.uk

The DWP’s announcement on commission, what does it mean for your scheme?

In March 2014 the Government announced a number of changes to the pension system to improve workplace pensions for employees. These changes affect both employer and employee to some degree, and the biggest change that will affect employers is the removal of commission payments to financial advisers.

In the past, many employer-based pension schemes were set up to pay commission at both scheme level and new employee level. This would cover things like scheme reviews, ongoing payments, new joiners and governance meetings. All of which could be covered by commission overall payments received in respect of the scheme.

This is set to change when initial and trail commission are removed in November 2014 and April 2015 respectively. Payments will cease and most advisers will have to review the position with the employers they service.

In most cases, this will likely result in moving to a fee based retainer to cover the services which would have previously been covered by commission.  

Employers affected by these changes need to revaluate the services they are receiving from financial advisers to make a judgement as to whether their fees are appropriate to the level and quality of services being provided.

Robert Simmons
Corporate Pensions Administrator
Telephone: +44 (0)20 7893 3456
Email: contactus [@] broadstone.co.uk

Auto-enrolment: Many Happy Returns?

Auto-enrolment recently celebrated its first birthday amidst largely celebratory comments from the industry.

Whilst it is too early to draw any strong conclusions about auto-enrolment, commentators have pointed to the lower than anticipated opt-out rates and the numbers of employees auto-enrolled into workplace pension schemes including NEST as a significant turning point in the UK pensions landscape.

Just last week Joanne Segars, CEO, National Association of Pension Funds (NAPF) at their annual conference commented that, "like the economy, we can see the green shoots of pensions recovery."

The Office for National Statistics (ONS) recently published figures showing active membership of occupational pension schemes fell by 400,00 in 2012.

Figures released by the Department for Work& Pensions (DWP) claim 1.6 million workers have auto-enrolled in the first year so auto-enrolment will clearly reverse the trend of falling pension scheme membership and this has to be welcomed.

However, increased membership, in isolation, will not deliver the holy grail of providing an adequate pension in retirement. Whilst auto-enrolment will undoubtedly provide increased membership it will not guarantee a level of pension sufficient for members to live on.

The level of contributions into auto-enrolment workplace schemes are clearly too low to provide meaningful levels of pension for many of those individuals who have auto-enrolled in the last 12 months. The minimum level of contributions currently is negligible and even at its height in 2018 will only reach a minimum level of 8%.

For workers earning a salary of £20,000 this would see a minimum contribution level of around £1154 p.a. With current levels of contribution rates how many of the 1.6 million people auto-enrolled last year are likely to build a pension pot that will deliver any meaningful level of pension?

Broadstone welcomes the first birthday of auto-enrolment but recognises  that, for the majority of current participants, the level of contributions is currently far too small to deliver enough happy returns for their retirement.

If you’d be interested in discussing how we can help you please contact me.

Nick Rudd
Corporate Benefits Director

Telephone:  +44 (0)20 7893 3456
Email:           contactus@broadstoneltd.co.uk