Saving towards a pension isn't everyone's favourite subject. The thought of a chunk of your wages disappearing each month understandably doesn't appeal to many. But with new government legislation requiring companies to automatically enrol employees into a pension scheme, more of us will find ourselves considering the options for financing our twilight years.
Under the new legislation, employers will initially have to contribute 1% to staff pensions (rising to between 4% and 7% in 2018), but some employers, such as the Co-operative Group, are going a lot further to help their workforce prepare for retirement.
"We have three options for staff," says Gary Dewin, the company's head of pensions. "For our top-level pension, we will give an amount equivalent to 16% of the person's salary, if they put in 8%. Not everyone wants to contribute this much, so we'll put in 2% if they put in 1% and if they contribute 4%, we'll also put in double. Pensions are also transferable if the person leaves the company," he adds.
With an eye to automatic enrolment coming in, the Co-operative Group has been reviewing its pension scheme since 2009. "After the sales and acquisitions, our new workforce – 100,000 people – were on 10 different schemes, which was complicated," says Dewin.
"We reduced the number of schemes to three and have been talking to staff in a variety of ways – including through newsletters and social media – to ask them questions and to explain their options."
The company is also keen to ensure its pensions are as ethical as possible. "We work closely with our social-goals team and with the organisation Fair Pensions," adds Dewin. "However, the way pension products work, it can sometimes be impossible to be sure you don't end up with a small slice of something that might not be considered ethical.
"More pressure is being applied to fund managers, though, and quite a few staff members ask about the ethics of the schemes."
Since the Co-operative Group began auto-enrolment into a pension scheme last November, very few staff have chosen to opt out of the programme. Dewin finds this encouraging.
"For years we had an open scheme and few joined it, but staff have told us they have found it great to have their options explained more clearly in recent years," he says.
"We will continue the momentum. Running a pension scheme doesn't stop with introducing the scheme, it's an ongoing journey of working out what is right for everyone.
"We have learned not to assume that anybody knows anything about pensions, so we go right back to basics and everyone fully understands how things work. We don't want them to feel bamboozled and we want them to understand all the benefits that come through a pension.
"This is a key part of recruitment and retention for us. It's better for our employees and that means better for our customers and business, too."
Setting up a scheme
The Pensions Advisory Service, an independent organisation, gives its top tips for how HR teams can run the most appropriate and effective pensions schemes
• Good communication, in plain English, is essential to ensure employees can make informed decisions about saving for their retirement.
• Look at schemes that suit the characteristics of your workforce. For example, if you have a high level of transient employees, focus on schemes that make it simple for them to move on.
• Be mindful of the cost that pension providers charge to run a scheme.
• Ask staff to consider increasing their pension contributions automatically each time they have a pay rise – and to keep checking their contributions.
• Make sure you know your automatic enrolment staging date and that systems are up to date. The Pensions Regulator's website can provide this information.
