By Charles Cotton, CIPD Performance and Reward Adviser, @CharlesMCotton, #CIPDmanifesto
The awareness of pensions and retirement issues among HR professionals has come a long way in the past 10 years or so. It is no longer possible for senior people managers or those aspiring to become leaders in their organisation to cheerfully admit that they know diddly-squat about pensions or they find them too complicated to understand.
The funding and provision of a pension has an impact on organisational performance. Get it wrong and not only will you find yourself in legal difficulties and have your brand dragged through reputational mud, but you will also see a negative impact on your organisation in terms of people and business outcomes.
There are many reasons for why pensions have become an integral part of an HR professional’s skills base, from the demise of defined benefit plans to the demographic changes that are shaping our labour market to the recent arrival at the workplace of automatic enrolment.
The roll out of automatic enrolment across UK workplaces has gone well to date, largely in part due to the efforts of HR professionals and their payroll, finance and legal colleagues. Yet against this backdrop, there has been constant revolution in the area of pensions with new proposals in the pipeline such as those around pension fees; new freedoms for members around how and when they access their funds; DC code of practice and guidance; collective DC, a new single-tier state pension; and pot follows members, etc, all of which test the capabilities both of HR professionals in their ability to deliver value for their organisations and members to understand what is going on, why and how it effects them.
Simplicity will be key to encouraging employees to save for their retirement, so we want the next government to stick to the current automatic timetable so that people know where they stand and what they need to do. Similarly, we want the government to keep the current annual and lifetime allowances around how much pay can be deferred into a pension. Changes should be linked to a long-term strategic vision, not a short-term tactical response to political challenges. The new freedoms around pensions could encourage workers to save more and to appreciate the pension contributions that their organisation makes on their behalf. However, with new freedoms come new responsibilities, so it is important that individuals have access to financial education through their lifetime so that they are in a position to take advantage of the new freedoms to make informed decisions. Finally, the government needs to ensure that small employers receive the support they need when selecting and setting up workplace retirement plans for their staff.
Looking longer-term, government, employers and employees will need to explore whether their levels of pension contributions are large enough to cope with increases in longevity, whether the current tax system incentivises workers across the various income groups to defer enough of their earnings, whether confidence levels among small business leaders around pensions is improving and how the financial capability and resilience of the UK population is evolving. The CIPD is neutral regarding who is best placed to deliver independent financial guidance. What is far more important to us are the values and behaviours of those delivering it and the culture of the provider, as well as the regulatory framework in which it operates. It is important that the Financial Conduct Authority covers these aspects as well as the standards expected, and develops them quickly so that employers know what is expected of them.
However, what can be achieved will depend on improvements in UK productivity. If productivity improves then we can afford to pay ourselves more. If we can pay ourselves more, then both employees and plan sponsors will be able to increase their contributions to pension schemes. This requires us ensuring that we are developing the skills and attitudes required to drive sustainable high performance companies and then deploying, managing, rewarding and recognising these behaviours, achievements and skills in the workplace.
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