Companies not measuring pensions

UK companies spend billions on pensions every year, but never monitor whether this money is well spent, according to new research.

The Alexander Forbes Financial Services Return on Pensions Expenditure survey found fewer than 2 per cent of employers measure the return they achieve on their pension investment in terms of improved employee and corporate performance. This shows that the majority do not understand pensions’ impact on shareholder value.

Employers do, however, regard pension provision as an important part of their corporate and social responsibility. 75 per cent see enabling their staff to retire with financial security as the single most important reason for providing a pension and 64 per cent say it is part of their CSR. Pensions are regarded as an important tool in the recruitment and retention of staff by more than half of all employers.

This stance is echoed by employees, with 75 per cent seeing a pension as the single most important employment benefit and 88 per cent thinking that saving towards a pension is a good idea. In addition, 68 per cent of employees regard a pension as an important benefit to consider when they are seeking new employment.

AFFS says UK businesses should increase their focus on measuring the value received from pension expenditure. In many cases employers are investing money in pension schemes for the benefit of former employees who are now deferred members of their pension scheme and a better understanding of how their pension expenditure benefits their business and their current employees would help them deliver maximum benefit for current employees and shareholders says the firm.

Tim Schofield, technical consultant at AFFS says: “Given the focus of corporate management on delivering shareholder value, it is perhaps surprising that so little attention is paid by British business to measuring the return delivered by its expenditure on pensions. It is clear from our survey that both employers and employees regard pensions as a vital part of the employment benefits mix, but employers are unable to quantify the value they receive from their pension expenditure in terms of improved workforce performance.

“In fact, we discovered that 85 per cent of employees have never been asked by their employers if they value their pension.”