Final value (temporary opt-out) - £249,419
Decrease in final value - £42,921
contributing £200 a month
pauses contributions for three years
Final value (no opt-out) - £223,796
Final value (temporary opt-out) - £189,354
Decrease in final value - £34,442
*Calculations assume a retirement age of 67 and an annual growth rate of 5 per cent, and an annual management charge of 0.5%.
As an employer you are not immune to some of these financial concerns, but you can take some cost-effective measures to support your people to make informed financial decisions:
Education about the workplace pension scheme
The nature of automatic enrolment doesn’t support employee engagement, as its design means that no decisions are made by employees prior to being automatically enrolled. Running pension education sessions giving insight into how the workplace pension operates, and of course highlighting the potential benefits, may support greater understanding. Once employees understand the role of tax relief and employer contributions they often see how much they are giving up relative to the saving and continue their membership. From an employer perspective, it also gives your people a greater appreciation of a relatively expensive benefit which is funded by your business.
Wider financial education
Equipping your people with the essential financial building blocks can support improved decision-making, with content such as:
how to budget effectively
sensible use of credit
how to build financial resilience through savings
mortgage options in times of rising interest rates
where to get help if the situation is more serious
This financial education also helps to contextualise where the workplace pension fits in, as part of an individual’s long-term financial planning.
Pension salary sacrifice
A more efficient method of deducting and submitting contributions, with the employee receiving the same pension contributions but retaining more of their take-home pay. This can have a big impact, with earners who are below the upper threshold and are paying 5% of salary seeing a saving of over 1% of pay shared between the employee and employer.
Other employee benefits which help make earnings go further
Some benefits like a cash plan, or a retail discount platform, help employees get more from their salary. Some of these types of benefits are bundled within other parts of your benefits offering, so now is a great time to review these and re-promote them to your people.
The number of workplace pension opt outs has risen over the last few months, but thankfully the overall opt out rate is still relatively low - for now.
While we cannot underestimate the gravity of some of the financial choices facing your people, you can take some actionable, practical measures to support employees to make properly informed decisions.
Johnson Fleming can help you to put support and employee benefits in place to help your people weather the current financial crisis, and help them to make good decisions that lead to positive financial outcomes.
Download our latest guide ‘Innovative ways to elevate your employee benefits and HR strategies for 2023’ to find out how to support your people - and protect your business - through the current troubling times, and look ahead to some innovations to consider for your 2023 strategy.