HR professionals should seize the opportunity created by the pensions crisis to step into the spotlight, experts urge.
The Turner Commission’s interim report into pensions put the state of British savings deficit into a stark light: we need to save an extra £57bn – either through state or private pension schemes – or work longer before retirement.
The situation leaves HR with a pivotal role in re-energising people’s interest in occupational pensions, according to Alison O’Connell, director of the Pensions Policy Institute.
She said HR would be key to turning round private savings gaps “in terms of companies deciding appropriate and feasible schemes for the company, what they can afford as employers and encouraging staff to get involved”.
Improving communications is the first step, which means HR will need to produce more quality educational material for staff, said Tim Keogh, European partner at Mercer HR consultants.
“People need to understand what they can get out [of a pensions scheme],” he said. “This means more than just producing a regulation and compliance booklet.”
David Coats, associate director for policy at The Work Foundation, said the choice of what pension to offer and communicating it to staff gives HR the opportunity to work closely with the unions. This combination would send a very powerful message to staff that they should be saving for retirement, he said.
“This need not be a controversial issue. Employers can use the unions as an agent to draw in reluctant employees,” Coats added.
He said that there needed to be a reverse in the culture of early retirement and voluntary redundancy. Too many companies believe older workers are expendable, meaning many employees feel pressure to retire early, he said.
To retain older workers, organisations need to focus on time and task flexibility, Coats said – enabling people to work smarter, not longer hours and employers judging staff on their skills, ability and experience, not on whether they are young or old.
The key findings of the Turner Report
There is a £57bn savings gap between how much people are saving and how much they need to save to have a comfortable retirement
12 million people are not saving enough for old age
If neither taxes, savings nor retirement ages are raised, pensioners face a 30 per cent decline in relative incomes in the next 30 years
Private sector pensions are in serious decline
The state pensions scheme is ‘one of the least generous in the developed world’
34 per cent of all workers paying money into defined contribution schemes are not paying enough
4.6 million people are in defined benefit schemes – this is expected to fall to 1.8m by 2050
The multi-layered state pension in the UK is a system of ‘bewildering complexity’
Raise the spending on state pension by 85 per cent or £57bn
Encourage a rise in private pension investment by same amount
Raise the age of retirement to 70
A combination of all three – the report said each of the changes in isolation would be an ‘impossibly large’ task
Source: The Pension Commission – Pensions: Challenges and choices