The best employers always build an attractive benefits package to entice new recruits. Traditionally, a workplace pension has featured among those benefits. But do pension funds still provide the same appeal as they once did?
Many employers wish to fill their positions with a young and vibrant workforce. But how many of those potential employees are thinking about pensions when they are at the formative stage of their careers? The truth is that pensions are on the radar for many potential recruits, regardless of what level they are at.
A Jobsite study discovered that 82 per cent of employees said pensions were important in their benefits package, placing them higher than bonuses, medical insurance and mental health support. However, given that auto-enrolment is now compulsory for businesses, can a pension set companies apart from their competition when attracting recruits?
Benefits are becoming more important
The job market is constantly evolving and, following the outbreak of the pandemic in 2020, the way people view their careers has changed. Due to a need for a better work-life balance and greater job satisfaction, people began leaving their jobs in favour of careers they felt were more rewarding, sometimes known as the Great Resignation.
Companies now have to do what they can to appeal to the best recruits, as people aren’t settling for an employer that doesn’t offer as much as others. For instance, companies that insist on bringing workers into the office full-time will struggle to attract staff compared to companies that offer hybrid or remote working.
With staff looking for greater flexibility, companies must adjust what they offer to provide it. Flexible working is just one of the benefits that help to attract new staff. Recruits are also looking for private health insurance, flexible annual leave and a positive working environment.
Companies that offer things that were seen as a perk by staff pre-pandemic are now expected. Adjusting your job adverts and informing recruiters to meet expectations through improved benefits will see a greater number of candidates coming forward for roles.
Are pensions valued higher than other benefits?
While benefits of any kind are important for attracting recruits, some are more important than others. Pensions rank particularly highly with staff who have one eye on their life after work. Senior positions are typically most concerned with a good pension as it may only be a decade or so before that person seriously considers retirement.
Do pensions matter to younger workers?
A study by consulting firm LCP took a deep dive into what workplace benefits employees valued most. The results of its survey discovered that from age 45 and above pensions were considered the top benefit.
As for those under 45, the benefit they considered to be their main priority was flexible working with pensions ranking as the third most important. This goes to show that even at a younger age, pensions are on the radar of all employees and would-be recruits. While pensions should be highlighted to attract more senior employees, it’s important to showcase your company’s pension benefits to all age groups and levels.
Is a basic pension enough?
Employees can opt out of paying into a pension fund created by their employer, however, this leaves them relying on the state pension when they retire. The current maximum UK state pension is £185.15 per week, which may not be enough to live on later in life. To help with this, companies in the UK are compelled by law to enrol all employees into a pension scheme but is that enough?
A standard pension isn’t exactly something companies looking to recruit top talent should be shouting about as it’s something that the competition also does. Everyone knows this and it doesn’t set a company apart. What does set companies apart when it comes to pensions is the contributions they are willing to make on behalf of their staff.
In the UK, the minimum pension contribution is 8%, where at least 3% of that must come from the employer. However, the average employer contribution in the UK is 4.5%, so companies falling below that mark may find it harder to attract people looking for long-term employment. The type of industry matters too, and in financial and education services employer contributions are over 9%.
What makes an attractive pension?
The aim of paying into a pension is to leave yourself with enough money once you retire to live comfortably. With the cost of living constantly increasing and many people living longer, pensions need to be sufficient enough to see people through once they give up regular income from a job.
The basic advice for pension saving is to put as much in as possible, as early as you can afford to. Increased employer contributions make the biggest difference, especially if they are willing to match what their employees put in.
Perhaps the most desirable pension is a final salary that is largely funded by an employer. These are common in large organisations that operate across the world – think the likes of Ford or Johnson and Johnson. But, they are only really possible for companies that make money on a global level because they are expensive.
While staff may have to contribute it commonly falls on the employer to make significant contributions. Their name is somewhat misleading as typically only a percentage of an employee’s final salary is offered. If an employee has worked somewhere for 30 years, however, they are likely entitled to at least half of their final salary as a yearly retirement wage. This works as a good incentive for workers to stick around for the long haul.
Should they compete with personal pensions?
A pension can be a tax-effective way of saving money as contributions are exempt from fees. That might make it more appealing for the individual to up their contributions but it’s not necessary for an employer to match this.
Yes, it’s important to offer a competitive contribution percentage for your industry but it’s not essential to match what someone might contribute to a personal pension. Personal pensions can yield larger gains but can be vulnerable to market fluctuations as they are used as investment funds for financial investors.
Visibility of a pension is important
One area where many companies fail to attract top talent is by downplaying or not even acknowledging their pension contributions. Posting pension contributions on a job advert might seem a little forward for some but getting the information out there is more important.
Equally, once you have hired employees, making their pension status visible is important, which is why the government is set to introduce a pensions dashboard. This increased visibility will only make pensions more important to recruits as they can access and monitor their contributions more frequently.
Does a pension help bring in the best recruits?
Pensions are certainly one of the main benefits that new recruits look for. Perhaps unsurprisingly, pensions are more important to senior level employees but they are on the radar of younger prospects. Employers must ensure they offer a comprehensive benefits package to recruits and current employees just to remain competitive in the job market.