Most UK workers are unaware of the impending introduction of auto-enrolment into pensions, according to the latest research from the Chartered Institute of Personnel and Development.
Its Employee Outlook: Focus on Pay and Pensions survey has found that 53 per cent of workers are ’totally unaware’ of the reforms, which start to take effect from October 2012.
Awareness of the reforms differs by sector, with 46 per cent of those in the private sector and 42 per cent in the voluntary sector aware of the reforms. Of those working in finance, 57 per cent are aware, followed by 54 per cent in construction and 50 per cent in professional services. Awareness of the reforms increases with age. Among the 18 to 24 age group, just 31 per cent of private and voluntary sector workers are aware of the changes, increasing to 40 per cent among the 25 to 34 age group.
The report also found a majority of workers (59 per cent) worried about paying for retirement. Women (65 per cent) are more anxious about where the money will come from to pay for their retirement than men (53 per cent)
Charles Cotton, CIPD adviser for performance and reward, says: “These findings suggest that both the Government and employers need to take a nuanced approach to communicating pension reforms to employees. With less than a year and a half to go, employee awareness is generally quite low.
“From our survey we can see the greatest challenge to communicating the reforms is among the young. A more targeted effort in communicating the changes to this group is needed to ensure they understand how the reforms will directly benefit them. The danger is that a cheap and cheerful one size-fits-all communication approach could end up costing the Government more in the long-term through a lower understanding and appreciation of retirement savings.
“Enrolling people into a workplace pension scheme is just one element of helping people pay for their retirement. We also believe that a move towards a non-means tested flat-rate pension would be beneficial to all, particularly as the removal of the default retirement age begins to take effect. Workers, employers and the Government all have an important part to play in the future of pensions.”
Peter Woods, pensions partner at PwC says: “Employers are increasingly concerned about the challenges of auto-enrolment. The biggest challenge is going to be around proper classification of worker category, and how to ensure the right communications are issued to the right people on time. The CIPD survey suggests that there is a broader communication challenge facing employers too – that of explaining the auto-enrolment concept to its workforce, many of whom may be new to pensions entirely.
“Providers of pensions, payroll, HR systems and flexible benefits packages are developing a range of options in readiness for auto-enrolment; these in themselves are going to cause a headache for employers, as it means they’re going to have to decide who they want to use to help with their worker identification and communication strategy. Even though the employer may feel they’re outsourcing the responsibility to identify and communicate with employees, the statutory duty to comply remains with the employer. Therefore, the onus on choosing the right approach is critical.
“The provider market is reacting to employer needs to create options which ease the operational and communication challenges, however employers should proceed with caution as an off-the-shelf approach may not be robust enough to meet their needs, particularly if they have significant employee turnover.”