New research from workplace pensions provider NOW: Pensions reveals that almost a fifth (18%) of small and medium sized employers in the financial services and property sectors plan to contribute more than the legislative minimum when they enrol their employees into a workplace pension, with a further one in ten (10%) intending to increase their contributions over time.
Across all of the 450 SMEs surveyed*, 8% say they intend to pay more than the minimum with a further 9% stating that they will pay the minimum initially, with a view to increasing contributions over time.
Morten Nilsson, CEO, NOW: Pensions said: “Auto enrolment is a legal obligation but employers in the financial and property sectors are waking up to the benefits of offering their employees a more generous pension package.”
Nilsson continues: “The perception is that large firms offer better pension provision than their SME counterparts but this isn’t necessarily true. Smaller companies very often know their employees personally and have a more paternalistic attitude.”
Automatic enrolment into workplace pensions began in October 2012 commencing with the largest companies. In May 2014 more than 12,000 firms who employ between 90 and 160 people will have to ensure they comply with the new legislation**.
A more generous pension for recruitment and retention
Over half (56%) of all employers surveyed who intend to pay more than the minimum say they believe it will help with the recruitment and retention of employees. Four in 10 (43%) think the minimum employer contribution has been set too low by the government. More than a third (39%) hope that by contributing more, their employees will be encouraged to do the same. Nearly a quarter (24%) say they don’t offer any other benefits so are happy to spend a bit more on providing a more generous pension.
Of those that intend to contribute more than the minimum, over half (54%) haven’t decided how much more they’ll contribute while nearly a quarter (24%) say they intend to contribute 1% more than the legislative minimum – a figure that over time, could equate to an additional £49,296 in the pension pot of someone on an average UK salary.
With the average salary in the financial services and property sectors standing at £34,167***, employees have a lot to gain by opting in / not opting out of their workplace pension as if they started contributing this year, their pension fund could be worth £544,314 in 40 years’ time****.
Compliance top of the agenda
Of the 40% of firms that plan to make minimum contributions, four in ten (41%) say it is because their focus is on ensuring compliance. A third (33%) claim they want to keep things simple and think paying more would complicate matters, while over a quarter (26%) say keeping costs low is a priority. A further one in five (21%) say trading conditions are difficult so they are tightly managing their employee remuneration.
Nilsson continues: “Auto enrolment is a legal obligation but many companies in the financial services and property sectors are looking to the future and the benefits of offering a more generous pension package.”
NOW: Pensions offers employers a choice of five standard auto enrolment contribution models. The models are designed to cater for all requirements, from those who want to comply with the legislation at minimum cost to those who want to offer their employees an enhanced benefit.