Regularly Review Your Workplace Pension Schemes says the CIPD

Pensions have become a significant extra cost for some employers, and an important benefit for many employees. But they are often set up and then forgotten, without regard to whether they provide genuine value or not.

According to recent research by the Chartered Institute of Personnel and Development (CIPD), employers and their HR teams need to reassess their defined contribution (DC) pension schemes regularly to ensure they continue to deliver optimum value for both employees and the organisation.

The CIPD highlights the substantial investment made annually into workplace pensions - £132 billion by employers and employees, alongside a £52 billion tax relief from the UK Government. Despite these significant figures, many employers remain uncertain about the effectiveness of their pension schemes, with recent CIPD data revealing that almost a quarter of employers surveyed were actually unaware of the type of pension scheme their organisation uses. This figure increases to more than a third of employers with less than 100 employees. The CIPD research also showed those respondents working for SMEs were less likely to say their pension represents value for money (51%) than those working for large firms (70%).

Given these findings, the CIPD advises employers, particularly those utilising DC schemes - the predominant pension type in the private sector - to undertake comprehensive reviews at least every five years.  The Government has suggested requiring Boards to nominate at least one executive who would be responsible for ensuring the workplace pension delivers good value retirement outcomes for staff.  Such evaluations should consider critical aspects such as fees, fund performance, member support, and overall retirement outcomes. 

Regular pension scheme reviews not only fulfil regulatory requirements, but can significantly improve financial wellbeing among employees, reducing absenteeism and presenteeism, and bolstering productivity. The CIPD further suggests that employers disclose pension contribution details openly in job adverts, a practice which could increase transparency, boost competitive contributions, and help narrow the gender pension gap.  It is very debatable that SMEs would be willing to do this given the fact that many do not offer anything beyond employer auto enrolment statutory minimum contribution levels.   

Ultimately, employers have a clear responsibility to periodically reassess their pension schemes, ensuring ongoing value and positive retirement outcomes for their workforce. Otherwise many of their workforce will want to work beyond their state pension age because they have belatedly realised that they cannot afford to give up work as neither they, nor their employer, had regularly checked what, and indeed how good, the financial returns were being offered by the pension provider.   

The full CIPD article can be found here.

The guidance provided in this article is just that - guidance. Before taking any action, make sure that you know what you are doing, or call an expert for specific advice