Employers shouldn’t be embarrassed about the pensions crisis – they should step forward and help!

on Oct 16 in 30s/40s , 50s/60s tagged by Brian Wood

As we pointed out in the book, the pensions crisis wasn’t caused by employers – it was created by circumstances outside their control, and tougher accounting rules have twisted the blade to make final salary pension schemes incredibly expensive.  These schemes were introduced by employers as a major benefit for their staff – so it’s ironic that they have recently got some bad press for not being more pro-active.

The problem seems to be that, not surprisingly, employers are embarrassed about being forced to reduce their pensions schemes and are fearful of being accused of being the bad guys.  The financial world is now hugely regulated, and this also inhibits them from doing anything else to help.

But there is a lot they can do to make a positive difference to their staff.  First of all, they shouldn’t be ashamed to admit that there is a pensions crisis and that they have been forced to take the actions they have.  They need to tell their staff that they now have to take responsibility for their own pensions in future and do whatever they can to help.  A stance that says “let’s keep quiet and pretend that it will all go away” is actually damaging because the truth is the pensions crisis will not go away.

So what else can employers do to help?  Here are some ideas:

  1. If they are still prepared to make pension contributions at a lower rate than before, they can make it clear to their staff what pension they can expect from this, and actively encourage additional contributions.
  2. If they have to cease contributions, they can inform their staff about their right to take a stakeholder pension and make it an easy and attractive choice.
  3. They can think about helping their staff who have a pensions shortfall to continue working past their normal retirement age if they are active, willing and still able to do their job well.
  4. Although they are prohibited from providing regulated financial advice, there is a huge amount they can do to make that advice easily available in the workplace.

So employers, you did a great thing in setting up pension schemes in the first place.  Don’t destroy all the goodwill by being fearful now – get on the front foot and join with your staff in helping them tackle their own pensions crisis!

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