I set up a stakeholder pension scheme for my staff in April 2001. I do not make any employer contributions to the scheme and take-up has been extremely low so far. Can you offer me some guidance for encouraging more employees to join the pension?
First, you are not alone in your situation. A large number of group stakeholder pensions contain few or even no members. There are a number of reasons for this and by understanding these reasons you may be able to improve the number of your staff who start their own pension.
Do your employees know the pension scheme exists? Lack of publicity for a stakeholder scheme might be one reason for low take-up. Alternatively, there may well be a lack of understanding of the importance of saving for retirement. Common misconceptions include that the member will lose entitlement to state benefits by making contributions (not always the case), that pension schemes are expensive (not true at all) or that they are somehow risky. Recent well-publicised cases of insurance company failure might deter employees from joining.
Publicising the scheme might take a number of forms. You might place information in staff wage packets or in the canteen. If your staff are using computers, you could dedicate a section of your company intranet site to the scheme.
How easy is it for staff to access the scheme? If it is difficult for them to join, this might discourage them from making contributions. Depending on the provider of your scheme, it might be possible for them to enter it electronically. If you have a company intranet site, you could include links to the provider's website. Some providers then allow the new member to join by entering their details on the website.
A better way of offering access to a stakeholder scheme is to use the services of an IFA. The IFA can offer individual guidance to potential scheme members and assistance in completing paperwork.
We often find that the single most offputting part of joining is choosing the investment fund link. A competent IFA can help your employees select the right funds for them. Workplace financial advice has become more popular and many employers are providing this as a benefit to their employees.
Stakeholder requires you to deduct member's contributions from the payroll and pass them to the scheme if the member requests it. Telling your employees about the availability of this feature might encourage more members to join.
Maybe your employees find stakeholder pensions difficult to understand? Although an original aim of stakeholder was to make the schemes as simple and transparent as possible, they are still difficult for most people to understand and some might say boring as well.
In December 2002, the Government introduced proposals to simplify pensions. While these may take some time to filter through, they might eventually help to encourage people to join stakeholder schemes. That said, this does not mean that there will be an automatic increase in take-up.
However, the single best way to get your employees to join is to dip your hand into the company pocket and make a contribution. Without doubt, the schemes which are truly sponsored by the employer are the ones that have the best take-up rate. If pensions are deferred pay, there is a reasonable expectation on the part of the that you will help them to save for their retirement.
Have you got a good working relationship with an IFA? An IFA can solve a lot of these problems and even encourage staff to join the scheme. Unlike the employer, an IFA is able to make investment recommendations to employees which can aid their levels of confidence when joining the scheme and reinforce the idea that they are making the right choice.
Your employees may also consider access to an IFA to be a valuable employee benefit. As well as offering advice to new members of the stakeholder scheme, the IFA can offer advice on all other areas of personal financial planning. An IFA can also offer you advice as an employer in respect of your obligations towards the stakeholder scheme.
The lack of an employer contribution may be one reason for staff not being attracted to the pension. By making a contribution, you might encourage more of your employees to join. A staff pension plan is an important employee benefit and demonstrates your commitment to their futures.
The scheme might also assist you with the recruitment and retention of quality individuals within the company. Taking an interest in your employee's futures should improve your working relationships with them and eventually improve the productivity of your business.