HR departments will have a key role to play if pension auto-enrolment – due to come into force in 2012 – is to succeed.
Steve Rumbles, head of defined contribution (DC) pensions at BlackRock – speaking at today’s launch of a joint report with the Chartered Institute of Personnel and Development (CIPD) into the business case for pensions – said HR departments should educate and inform employees about their pension choices in the run up to 2012 and beyond. But he warned they needed to distinguish between giving information and advice.
The report said that in the “new pension world” that auto-enrolment will usher in, “a key role for HR is to empower the employee through education and personal awareness so that they can make informed choices about pensions and other benefits that the firm may offer”.
Some 81 employers – a mix of large, small and medium-sized companies – and 840 private sector employees were polled for the report. It found a high level of ignorance among employees about pensions.
Just over one in four of the employees surveyed knew how much they should be saving for a comfortable retirement, and 56% said they were worried they will not have enough. Fewer than half (48%) had reviewed their contribution levels in the past two years, while 47% said they were “resigned” to postponing their retirement and working longer than they had planned.
CIPD chief reward adviser Charles Cotton said: “The research clearly shows that employees and employers alike are sleepwalking into a potential retirement disaster. Many employees are planning to rely on downsizing their home, family hand-outs or on government to support them in retirement, while many employers will face the prospect of trying to motivate an older workforce who are simply soldiering along because they cannot afford to retire.
“While employers are no longer responsible for the retirement planning of their employees, it makes sense for them to educate their staff on the importance of saving into a pension scheme.”
Blackrock and the CIPD said that interactive online tools should be provided by employers to give workers information on how much they need to save. Employers should also consider subsidising the cost of expert advice on pensions.
The research – which included 61 telephone interviews with responding employers – identified employers’ areas of concern:
Little attempt to ensure pension approach is aligned to the business strategy or the employer brand
Concern about employee take-up and contribution
Too little focus on pensions and employee recruitment, retention and engagement
Too much focus on DC benefits even though only a minority of the workforce are in such pension schemes
DC schemes benchmarked against the norm, rather than what makes sense for the employer.
The report also called on HR professionals to understand pensions and the role they can play in supporting reward and people management strategies. They also need, it said, to examine the various ways in which they can evaluate whether their existing approach to assisting their employees to plan for retirement is actually working as the company intended.