New insights show most employers plan to adjust HR strategies for better retirement outcomes.
- Research by REBA reveals that current pension contributions are deemed insufficient by many employers.
- A significant 89% of employers anticipate adopting new strategies for retirement adequacy.
- Half of the employers are considering increased pension contributions to meet future needs.
- Engagement and education on pensions emerge as vital steps to enhance employee retirement outcomes.
A comprehensive study by the Reward and Employee Benefit Association (REBA) has unveiled that a significant number of employers, nearly nine out of ten, are contemplating revisions to their human resources strategies. This is driven by concerns that existing pension contribution levels fall short of securing adequate future retirement outcomes for employees.
The survey highlights the pressing challenges faced by employers today, with nearly half (47%) acknowledging the need to address pension adequacy issues immediately. Additionally, 28% recognise this as a future priority. Such findings underline the urgent need for systemic changes within workplace pension schemes over the coming years.
In light of an industry-wide acknowledgement of current inadequacies, Chancellor Rachel Reeves’ recent announcement regarding a review of defined contribution workplace pensions is particularly timely. This may catalyse adjustments in contribution rates and prompt employers to re-evaluate their strategic approach to pensions.
Interestingly, about 37% of surveyed employers currently meet the statutory minimum contribution rates required by auto-enrolment; however, this figure is expected to decline drastically. Only 17% of employers foresee maintaining these rates in two years’ time. By 2026, a notable shift is anticipated with nearly 19% of organisations planning to contribute 10% or more towards their employees’ pensions.
Beyond financial contributions, employers recognise the importance of providing comprehensive education on pensions. Enhanced engagement and early involvement of employees in pension planning are seen as critical components for improving retirement outcomes. Nearly all (98%) employers express a desire to leverage support from pension providers in this regard.
Moreover, over three-quarters of employers are seeking to collaborate closely with consultants to devise effective strategies that ensure retirement adequacy while optimising their financial investments. As Jo Gallacher from REBA articulates, this dual focus on improving contributions and fostering better financial education reflects a broader strategic goal within HR departments.
Ant Donaldson of Wolseley acknowledges that the ongoing cost-of-living crisis presents additional challenges for employees trying to balance immediate financial concerns with long-term retirement planning. He emphasises a holistic approach to financial wellbeing, involving a revamp of pension offerings and utilisation of leading master trusts to support employees’ diverse needs.
Employers are increasingly prioritising strategic changes to ensure better retirement outcomes for their workforce.
