Four reasons to regularly review your workplace pension

By Ian Bird, partner at Secondsight.

Over the past few years, workplace pensions have become more competitive.  We’re seeing annual management charges and costs going down, whilst the overall proposition from pension providers has been improving.  As a result, many workplace pension schemes may now not be offering the best value for money for your employees.

I have been championing the benefits of conducting regular workplace pension reviews for a long time now and I’m increasingly seeing some of the lowest Annual Management Charges (AMCs) I’ve ever seen.

There are a number of advantages to conducting regular pension reviews in addition to lower AMCs and below I’ve listed what I consider to be the questions you should be asking about your current workplace pension:

Could my pension be more competitive?

As touched on already, the AMC on workplace pensions has been falling. I recently worked with a charity client, and as part of their review negotiated with the provider a reduction in the AMC to 0.24%, they had been paying 0.75% – a reduction of approximately 66%. Which is a considerable saving for their employees.

It’s worth noting that cheapest isn’t always the best, so when conducting a pension review, you should consider a broader brief than just the AMC charges.

Could we improve employee engagement?

Many providers have improved their member communications and are now offering Apps, push notifications and regular pertinent information and reminders about the pension offering. Providers are also making it easier for employees to manage their pension and take action. You may find from reviewing your pension you can simply upgrade with your existing provider or perhaps explore what other pension providers are offering.

Improving how employees engage with their pension, coupled with your own communication strategy around your workplace pension can make all the difference between employee engagement and helping your people achieve the retirement they might want when that time comes.

Are we missing out on flexibility and extra financial wellbeing support?

We are all aware of the changes to the pension landscape and retirement; pension freedom, state pension age changes, default retirement age changes. Most pension providers are already able to accommodate these variables, but a review will confirm if this is the case with your existing pension.

Additionally, many pension providers now offer added value financial wellbeing content as part of the pension, such as other workplace savings solutions including ISAs or budgeting guidance.

Does our pension offer ESG investment options?

Individuals are becoming more conscious of the need to make positive changes to contribute towards a more sustainable world and this is increasingly crossing over into pensions and investments. Many of your employees are likely to be invested in your pensions default fund, do you know if this incorporates any ESG factors? Last year we conducted some research into workplace pensions and ESG, where 42% of (employee) respondents told us that they would be happy to be automatically enrolled into an ESG default fund.

Your employees may also be keen to focus on ESG so it may be wise to look at the funds available outside of the default fund.

In conclusion, it’s worth asking these sorts of questions of your existing pension consultant or directly with your pension provider and I would suggest you should be reviewing your pension every few years, and conducting some form of Governance around the pensions performance annually.