Pension reform 2012
For a pension to be an effective benefit, employees must understand how they work and the value it can bring to them.
This will become increasingly important once the Personal Accounts regulations come into force in 2012, where organisations will have to either enrol their employees in a Personal Account, or put them into the company's existing pension plan, provided that the plan is as good as a Personal Account. Either way, if an employee does not want to be a member of a plan, he/she will have to opt out.
The new system will effectively force many workers to save for their pensions - and force their employers to contribute as well. Therefore, it’s important that employers communicate this benefit effectively so it can be valued and appreciated throughout the business.
Recent findings of the Employee Outlook: Focus on Pensions, a survey from the Chartered Institute of Personnel Development (CIPD) supports this premise. As much as a third (33%) of those interviewed, claimed that they did not know how much their employer contributes to their existing pension schemes and also expressed the need for more information – in particular, regular updates and advice about the amount required to save each month to ensure comfortable retirement.
Although traditionally employees were educated about their pension schemes at the recruitment and selection stage or during the induction process, an increasing amount of employees are now proactively planning for the future, therefore seeking out information on an ongoing basis.
Some useful media for communication on pensions issues could include:
- Written information including simple explanatory booklets, annual pension benefit statements and information in pay slips.
- Access to telephone helplines or email addresses direct to pension administrators or investment managers so that employees faced with pension choices can receive clear, direct assistance.
- Face-to-face financial education programmes.
- Use of company intranets or interactive computer software to educate employees about their scheme and to show, for example, projected benefits and options.
Good practice when communicating pensions includes:
- Ensure that the material communicated reflects the brand of the employer and its culture.
- All material should be written as plainly as possible.
- Line managers should be involved in the communication process as appropriate.
- Not only should the message be about what the scheme is and how it works, but why it is important for employees to plan for their financial future.
Throughout the year, we will keep you updated on the pension reforms so be sure to watch this space!