One in six employers say they have never reviewed the workplace pension scheme they offer to ensure it offers value for money, according to the latest research1 from the pensions experts at Everywhen. With 11% of employers responding to state categorically that they have never reviewed their workplace pension scheme, and 5% admitting to not even knowing, that makes a likely 16% of (one in six) employers who have never reviewed the scheme they are currently offering to their employees to check it offers value for money.
Sorangi Shah, client director at Everywhen, says:
“It is unsettling to know that there are so many pension schemes that have never been reviewed to ensure they offer good value. A pension scheme appraisal should take place at least every three years and it is vital that this covers many aspects of review, including costs.”
When did you last review your workplace pension scheme to check it offers value for money?
Within the last 12 months 48%
Within the last 3 years 36%
Never 11%
Don’t know 5%
The good news is that nearly half of all employers responding to the research said that they had reviewed the company pension scheme they offer within the last 12 months. This is higher than might have been expected and is a positive sign.
Criteria lacking for pension value for money
There is a lack of set criterion for value for money when it comes to company pensions. The Value for Money (VfM) framework is a joint regulatory initiative by the Financial Conduct Authority (FCA), The Pensions Regulator (TPR), and the Department for Work and Pensions (DWP) designed to ensure workplace Defined Contribution (DC) pension schemes deliver optimal retirement outcomes. But this legislation is not due to take effect until 2028.
For now, each employer must create their own metrics, with nothing laid down in stone by the industry. Adviser-led analysis is likely to give a greater insight than an employer trying to judge for themselves. Value for money should be assessed across many factors including costs and charges but also investment performance.
Everywhen believes, however, that value for money should go further still in its analysis, to include such things as member engagement. Certain questions should be asked: What digital tools are there for member experience? Does the scheme offer connectivity with payroll systems and benefit platforms? All these areas should be considered and there are many more that will differ by company. Some employers may want to make administration as easy as possible, while others may want a wide range of investment options. Advisers can help to set objectives and to check the scheme is delivering.
Main influences on pension choice
Although employers are not all reviewing their pension schemes at optimal intervals, they do seem to at least be looking carefully at the options when setting up their workplace scheme in the first place.
What, if anything, are the main influences for you in choosing a company pension scheme?
Brand reputation of pension provider 31%
Costs and charges 31%
Ease of setup and ongoing management 27%
Investment options 23%
Payroll / HR integration 23%
Employee experience (user-friendly apps and communications etc) 22%
Retirement support and options 21%
Availability of wider workplace savings (General investment account/Individual savings account 16%
Associated support and communication 14%
N/A we do not look for anything in particular 7%
Don’t know 3%
Sorangi Shah says:
“It is very positive to see that employers are not just basing their pension decisions on costs alone. The research results are consistent with our experiences at Everywhen – which show that a pension provider’s brand reputation is equally important. It is understandable that provider repute is in sharp focus when money is being saved over several decades. There are, however, some less well-known providers around too, and financial advisers will be able to assist with making the right choice for the individual company and its employees.”
While costs and charges will always be an important factor, employers are showing a balanced approach to what influences their scheme choice. Investment options are clearly and rightly a significant matter. Ease of set up and ongoing management is also important for employers, as they have more systems and data to manage, with additional connectivity and integration becoming vital.
Sorangi Shah concludes:
“A company pension scheme needs to work for the company, the HR professional and the employee. Including a good range of factors and influences in choosing and reviewing a scheme is likely to support good member outcomes, which, after all, should be the focus.”
