Workplace savings – making employees feel financially secure during organisational change

I was recently talking to someone about the seemingly ongoing upheaval at their company. It seemed to me that this large employer is constantly undergoing some sort of organisational change; change that ultimately always results in staff redundancies.

I was interested to understand why this person stayed there, despite the apparent never-ending worry that she could be the next one out of the door?

The simple answer was “the pension scheme”. Ok ,she is one of the lucky ones who is still a member of a final salary scheme. But nevertheless, she was prepared to live with reducing job security for the sake of her pension.

I had only just met this person, but I did get the sense that there were other constructs, such as job satisfaction and competitive pay, that together definitely helped to create ‘stickiness’, but there was no doubt that the pension scheme was at the top of the list.

The pension scheme pull

The Engaging with Saving report (2018), from Aegon and the Confederation of British Industry, found that 42% of businesses believe that their pension scheme improves recruitment and has a positive impact on employee retention. And 36% of respondents believe that if they could improve employee engagement with pensions, their ability to recruit and retain would be further improved.

But are pensions the ultimate ‘golden handcuffs’ for all employees?

Our own Realigning the workplace savings offering to meet the needs of millennials (2018) research would suggest not. For those closer to retirement, the pension scheme is of paramount importance and will keep them engaged regardless of organisational change, but for younger employees this is probably not the case.

More than 40% of employees aged 55 and over, indicated that saving for retirement was their biggest financial concern; logically therefore you would assume that a good pension scheme is going to have a positive impact on retention for this group of employees. However, for millennials, less than 10% were concerned about retirement. So conversely, you could deduce that pensions are likely to have very little, if any impact on retention levels for younger employees.

So, does this mean that employers are wasting their money when it comes to pension provision for younger employees?

No, pensions are important for everyone regardless of age. And as we know, the younger you start saving, the easier it is to build up a decent retirement pot. But just as it takes time to build up savings, so it takes time to realise the value of what you have. So, the older you get, the more the company pension scheme means to you.

The bigger picture

If pensions are to add anything positive to retention levels among younger employees, they need to be part of a bigger workplace savings solution. Older employees are engaged with pensions because they provide a solution to their biggest financial concern; retirement. We just need to understand the biggest financial concern for millennials and provide for that, and surely it will have the same positive impact on recruitment and retention?

Look no further. One of the biggest financial concerns for our younger colleagues is buying their first home; over 25% of millennials cited this as their biggest financial concern in our research. Pensions do not address this concern but a Lifetime ISA (LISA) does.

The LISA was introduced to allow people to save for two main life events; first home purchase and retirement. Anyone under the age of 40 can open one and contribute up to £4,000 a year, until age 50.

The government adds a 25% bonus on every pound contributed, up to a maximum bonus of £1,000 a year. That’s a potential bonus of over £32,000 for anyone saving from age 18. If cash is withdrawn to help finance a first home or the account holder is at least 60, there are no penalties.

So, if pensions retain older people, surely a LISA will retain younger employees? Both vehicles are addressing the needs of both groups.

Addressing the real concerns

When there is organisational change, employees are naturally going to worry, especially if there is a risk of redundancy. How will they pay their bills? How about their retirement plans? Perhaps buying their first home now needs to go on hold? Or maybe they just start looking for a new job!

Address the real financial concerns of your employees and during organisational change they’ll be less likely to jump ship voluntarily.

The author is Steve Watson, head of proposition at Smarterly.

This article is provided Smarterly

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