Five reasons your workplace pension may be failing your business (and why you should review it)

  •  By
  •  Murray Humphrey

You’ve already got a workplace pension in place so why would you change it? It’s going to be a major league pain in the backside and frankly, you’ve already got enough to do.

Well here’s why: your business and your employees could suffer if you don’t and with modern digital pension providers it's actually super easy to switch.

1. Is your current pension provider helping you save money?

If they haven’t already told you about the tax hack that gives back, then they’re doing you a disservice. Salary sacrifice is a way of saving both your employees and the company money.

The tax you’re hacking away at in this instance is National Insurance (NI). Employees pay it according to how big their salary is and companies pay it according to the size of the employee wage bill.

If you ask your employees to reduce their gross salary (for example, by the 5% or more they contribute to their pension) and offer to pay the difference into their pension, their take home pay increases.

This is because the less an individual earns, the less NI they pay. Plus, they can continue to invest the same amount in their future, despite their gross salary seeing a reduction. And if the wage bill of a company reduces, they too pay less National Insurance.

Don’t believe us? Here's a salary sacrifice example that shows how an employee can boost take home pay by £300 and a business of 100 employees can save £35,000 per year.

We’ve been helping employers with this for a couple of years now and have a hassle free process to support them with implementation. Find out more about our salary sacrifice pension.

2. You (and your staff) could be losing out on a more comfortable retirement

Not switching your workplace pension provider could be costing you and your colleagues more than you think.

Although we all know past performance is not a reliable indicator of future returns, historic fund performance for pension providers varies a lot, with some performing well and some proving disappointing.

Although average annualised growth rates tend to range between 3% to 4%, the worst performers can consistently range between 1% to 2% and the best between 4% to 6%.

Small percentages like these never sound like much, but if you’re stuck with a poor performing pension fund across an entire career, each 1% below average annualised growth rate could cost the typical employee (with a median career salary of c.£32k) £100k+ in final pension pot size!

This is why reviewing the company pension regularly is so essential.

People concerned about money tend to take more sick days, feel less motivated, and become more dissatisfied with their jobs

3. Employees worried about money are less productive

When employees are worried about their finances, it can seriously impact how well they perform at work.

A study by the Chartered Institute of Personnel and Development (CIPD) found that when people are concerned about money, they tend to take more sick days, feel less motivated, and become more dissatisfied with their jobs.

In a survey we ran last year, 87% of Brits told us that financial stress was impacting their mental health. More than two thirds of them (70%) were worried about being able to afford to pay into a pension.

Stressing about financial issues can make employees feel anxious, easily distracted, and unable to concentrate properly, which ultimately leads to a drop in their productivity.

An easy way to make paying for their future one less worry is to provide a pension that’s easy to manage. A Penfold pension sits on their phone (or laptop), clearly showing how much they’ve got, how much they’ll need and how to save it. They can also alter contributions with a couple of taps.

Giving a clear picture of post-work income, it helps with pension anxiety, giving them one less thing to worry about. We also offer financial wellbeing education and support resources.

4. Attracting (and keeping) the best talent

The UK unemployment rate is currently hovering around historic lows. In the first quarter of 2023 it was 3.9% (The lowest recorded was 3.4% in 1973). This means a lot of the people you are trying to attract are already likely to have a job. So here are two results from a survey of 2000 adults that might prove interesting:

  • 16% of employees would jump ship for better benefits.
  • 90% of employees would stay in their current job because of their pension scheme.

If your staff aren’t engaging with your pension because it’s too complicated or (perhaps worse), boring, could it be time to ask yourself how tempting your most expensive benefit is?

Because Penfold’s pension sits on your phone, it’s easy to manage and (dare we say it) fun to engage with. Almost as tempting at TikTok? Not quite (but we’re working on it).

5. Switching the company pension doesn’t have to be a headache

Regardless of how many employees you have, you’re free to change the company’s workplace pension provider at any time. There is no contract for a defined period of time. It’s as easy as 1, 2, 3.

  1. You tell your new provider that you’re ready to switch.
  2. You contact your current provider and let them know.
  3. Brief your employees on the switch and what it means for them.

Third one feel like a bit of a big job? Are you already thinking of the uptick in pension questions as employees are nudged into looking at their pension, their plan, contributions and more?

A ‘welcome session’ from your new provider to help deal with questions can help a lot. We love doing these. We give an overview of the platform, how it works and distribute a welcome pack to all new customers. Read our article about how easy it is to switch workplace pension provider.

The workplace has changed, maybe it’s time your workplace pension did too.

Book a demo of Penfold’s workplace pension today.

With investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice or as a recommendation to invest with any mentioned firm. Past performance is not a reliable indicator of future performance.

A photo of Murray Humphrey

Murray Humphrey


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