Is your work place pension right for you?

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Published on
5th October 2021

It is fair to say the auto enrolment has been an initial success.  The most recent data published by the Office for National Statistics (May 2021) showed 78 per cent of UK employees were members of a workplace pension scheme in April 2020. Compare this to just 47 per cent before auto enrolment legislation.

Since the introduction 9 years ago, the original minimum contribution was 1% from employer and employee compared to the current minimum 3% employer and 5% employee.

Whilst contributions have increased since 2012, many employers still use their original workplace pension provider. When employers first knew they had to meet auto enrolment duties or face financial penalties from the Pensions Regulator there was a rush to get a qualifying scheme in place.

The scheme that was most heavily publicised was the government backed NEST scheme. Similar schemes quick to market were The People’s Pension and NOW: Pensions. But 9 years on it’s questionable if these simplistic options are sufficient for employees needs when saving for retirement.

After initially being slow to market, big name providers have entered the workplace pension scheme space and are throwing huge resources at their products. Names like Aegon, Aviva, Royal London and Standard Life all now offer sophisticated auto enrolment qualifying schemes.

To assess the quality of a workplace pension and compare these providers with the likes of NEST we need to look at 2 main things; fund choice and functionality.

In terms of fund choice, People’s Pension offer 11 funds, NEST 12 and NOW: Pensions just 1 fund. When you consider an employee may be a 22 year old saving in their first pension or an individual considering retiring, their options are incredibly limited in finding a suitable level of risk for their circumstances.

Many employees, especially younger generations, are more and more interested in investing ethically. Simplistic options like NEST and People’s Pension offer 1 ethical fund. Given ‘Ethical’ is an entirely subjective matter this is not necessarily going to meet all your employee’s needs. Compare this with Aegon who have over 100 “ESG” options that take a particular interest in Environmental, Social or Governance matters or even a specific cause such as clean water.

Functionality is where the bigger providers larger resources really show. Employees are more likely to engage with their pension if managing it is an enjoyable experience. Aviva’s My Aviva app makes checking fund values, switching investments or updating personal details easy on a smartphone or tablet rather than having to use a laptop.

 Aegon are showing real innovation with their personalised video statements, no more annual paper statements with potentially meaningless projections that often get thrown straight in the bin. Using risk profiling tools and goal setting on their portal “Retiready” means employees will know exactly how much they should be saving and if they are on track.

If you would like to discuss upgrading your company pension scheme to retain and attract the best people for your business contact Jonathan Lecomber at jlecomber@ge-wm.co.uk