Workplace pensions are now an important part of people’s employment. In 2012, the introduction of auto enrolment meant contributions to workplace pensions increased significantly and in 2020, 19.4 million1 employees were participating in a workplace pension.

But, whilst auto-enrolment has clearly been a success, there are still some areas of workplace pensions which need to be improved.

One of these areas is communication. Many employees are automatically enrolled by their employer when they start at the company. However, many are enrolled in the default fund and continue to pay into it without any further thought or consideration for months or years down the line and may not be aware of what their default fund actually invests into, for example whether it includes sustainability as a focus when investments are selected. As sustainability and ESG (environmental, social and governance) investing grow in popularity, many employers are now reviewing their workplace pension default fund options and seeing ESG becoming an integral part of both their default fund and also a range of alternative fund choices being added.

Our latest research that only 23% of employees said that they are aware that their workplace pension offered access to ESG funds. 43% said they were not aware and 35% said they didn’t know.

However, with hard hitting headlines around the world about climate change, increased calls for better working conditions, equality and diversity rights, people are looking to do more, and their pension could be a way to help. According to a study published in Pensions Age2, switching your pension to a more sustainable fund can help you to significantly reduce your carbon footprint.

It’s vital that employees have the choices to make better informed decisions. But how can you, as an employer, help? Here are our 3 top tips:

 

Send a reminder every year

Lots can happen in a year. People change roles, get married, have children and this can all influence someone’s mindset and finances. By reminding your employees every year about what their current default fund looks like and what other options are available to them, it can help employees make the best decisions for them.

 

Ask your pension provider for regular updates

Whilst your provider should be in regular contact with you, sometimes this is not always the case. Make sure you ask them to provide you with regular updates about how they approach ESG principles, the industry in general or any new funds available. Also ask them for resources and materials which you can send your employees, including any information on sustainable investment options. Just relying on them contacting you could be costing your employees.

 

Share everything with everyone

In this instance, oversharing has its benefits. Don’t assume your employees won’t be interested to hear all the latest pension options just because they haven’t asked about them. It’s a good idea to share all the information and with everyone, no matter how close or far they are away from retirement. And remember to share all the information in as many ways as possible, so it reaches everyone. This could include email, face to face, posters, intranet and more!

Our latest research really brought to life the lack of awareness surrounding ESG when it comes to workplace pensions. To find out more about any of the above and to see the latest opinions on how employees feel about ESG and their workplace pensions, download our free whitepaper here.

Please note:

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates and currency fluctuations at the time benefits are taken.

The value of an investment can go down as well as up and you may get back less than you originally invested.

Secondsight is a trading name of Foster Denovo Limited, which is authorised and regulated by the Financial Conduct Authority.

Information correct as of 30/09/2022

Sources:

  1. https://www.gov.uk/government/statistics/workplace-pension-participation-and-savings-trends-2009-to-2020/workplace-pension-participation-and-savings-trends-of-eligible-employees-2009-to-2020
  2. https://www.pensionsage.com/pa/Make-my-money-campaign-launches-highlighting-power-of-sustainablepensions.php