Following the introduction of auto-enrolment in 2012, the workplace pensions market has evolved and in that time there have been some significant changes in legislation and what support workplace pension providers offer to scheme members. This includes new default lifestyle funds to accommodate the change in legislation, new mobile phone apps and an assortment of technology to provide better support tools for members plan their retirement journey. Additionally we have seen the market become much more competitive for new clients resulting in lower default fund charges.
It’s therefore extremely important that employers periodically review their workplace scheme to ensure their scheme is providing good value for its employees, taking advantage of the array of new support tools these providers are developing. There are 5 key questions employers should consider to ensure their employees are getting the best possible value from their workplace schemes:
Since commencing auto enrolment, have you;
- Reviewed the suitability of your default fund since you commenced auto enrolment? Pension freedom legislation changed in 2016 introducing new options for members in retirement. Many workplace schemes still have old default funds that provide a glidepath to annuity purchase. The choice of default fund could have a financial impact on employees. If you have an old default fund, this may not be the best solution and employers should consider what other options are available?
- Changed the scheme default retirement age for your default fund? The state pension age has changed, yet many schemes still have a default retirement age of 65. As life styling funds are linked to the default retirement age this could mean that members start the lifestyle glidepath journey too early. This again could potentially impact employees financially and therefore employers should review this. Any financial risk to an employee could be a future financial risk to the employer too.
- Ever reviewed your default fund scheme charges? Since auto enrolment, workplace default fund charges have been reducing as scheme assets mature and grow. This has sparked a secondary market and many workplace providers have been reducing default fund charges to win new scheme or retain their existing clients. Â If you have never reviewed your scheme charges, you should consider conducting a market review, the outcome of which maybe lower charges for your employees.
- Reviewed the investment performance of your default fund? Most employees remain invested in the default fund selected by their employer. This creates a degree of implied trust on employers to make the right investment choices for their employees default fund. In recent years investment markets have experienced much volatility and its therefore imperative that employers review their selected default fund to ensure it provides long term valuable returns for its employees. Â Ignoring this could potentially impact employers financially in the future.
- Considered salary sacrifice as a payment option for your employees? With a much publicised cost of living crisis there has never been a better time to consider the merits of introducing salary sacrifice for employees. Salary sacrifice can provide significant financial benefits to both employees and employers and is widely regarded by employees as an essential option for making pension contributions. Some employers use savings to help fund additional benefits to improve recruitment and retention.
In summary
The above article provides five compelling reasons for employers to review their workplace scheme. The journey to a better financial future may just be a phone call away. If you would like to discuss any of the above questions in relation to your scheme please free to contact me at vincentmatthews@origencs.co.uk or 0344 209 3198 for more information. Calls are charged at your phone company’s basic rate. All calls are recorded for business purposes.
About Origen
Origen is one of the UK’s leading national financial advisers, with a history of providing advice for 140 years. We have received numerous awards in recognition of our service, including Retirement Planning Advisory Firm of the Year for the last 11 years. We help support individuals, families and businesses across the UK and are here to help you. We can also provide financial advice on investments, protection for you and your family, business finances, preserving your wealth as well as retirement planning.