“Pensions aren’t at the forefront of most people’s minds when applying for a job but they should be given how valuable they can be. A generation ago employers with defined benefit schemes were the big attraction, even if many people took them for granted at the time. But the glory days of defined benefit schemes are well and truly over in the private sector and you would be very lucky to find a new job offering you membership of these so-called gold-plated pension schemes.
“While Brexit has cast some uncertainty on the outlook for the jobs market, it doesn’t change the fact that there are people out there looking for jobs and companies recruiting. It also doesn’t dilute the importance of a pension when applying for a job, arguably it strengthens it. And in this current economic climate, job applicants need to understand the full value of their workplace pension when going through the recruitment process.”
DC may be the norm but not all pensions are equal
“With all employers now providing a pension scheme and paying into it for their employees, auto-enrolment has set a new minimum. For most employers this is a defined contribution scheme with fixed employer contributions, at or above the statutory minimum, currently 1% of a band of earnings, rising to 3% in 2019. But this doesn’t mean pensions are all the same. Some employers will pay substantially more and it is worth checking. If one employer is prepared to pay 5% and another 8% think of this as extra salary, which could be worth a lot once investment returns over twenty or thirty years are taken into account.
“While pensions form a key part of people’s remuneration package, often they are missing from the job advert or it’s unclear how much the employer will pay in. This means job hunters are unable to work out the true value of the remuneration package. When looking for a new job, people should find out how much the employer pays into the pension scheme, whether they will match the employee’s own contribution (and if so up to what level) so the pension pot grows quicker and the level of pension financial support provided in the workplace, such as access to advice and online tools.”
Key questions to ask a future employer about their workplace pension:
- How much will the employer pay in to your pension?
- Will the employer match your pension contributions, so if you pay more, will the employer pay more?
- Is there a limit on the level of employer contributions?
- Do you have to make contributions to get the employer contribution?
- What happens if you opt-out of the pension scheme, is the employer contribution lost?
- Does the employer provide access to financial advice in the workplace or contribute to the cost of you getting financial advice?
Kate Smith continues: “Job ads provide an additional platform for employers to promote and publicise their best assets – their workplace pension scheme hopefully being one of them. It’s a missed opportunity for an employer not to mention their pension offering at this stage to get a head start on engaging with potential employees about the importance of saving for retirement.”
Tips for employers prepared to pay more than the statutory minimum to help use their workplace pension plan to attract talent:
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Mention the workplace pension in all company job ads.
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Highlight how much the employer contribution is in all company job ads.
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At interview stage, mention the value of the workplace pension and the benefits of saving for retirement and the role of the employer in that journey.
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