Employers are contributing to the UK’s pensions crisis by failing to keep their staff informed about their pension arrangements on an on-going basis.
The annual reward survey by the Chartered Institute of Personnel and Development (CIPD) found that the vast majority of employers – almost nine out of ten - tell staff about pensions during their recruitment and induction process, but fewer than half (46 per cent) keep them updated about their pension arrangements.
Duncan Brown, Assistant Director-General for the CIPD commented: "Employers are failing to communicate their pensions arrangements effectively after recruitment, which means that the full value of their rewards package is not appreciated, and employees don’t often understand the full importance of issues such as saving enough for their retirement."
The vast majority of the companies sampled (94 per cent) contributed to the pension arrangements of existing employees, but slightly fewer (86 per cent) contributed to schemes for new employees.
Final salary schemes are increasingly restricted to existing staff, with just under half of them offering such plans to new hires. This trend is especially prevalent in the private sector, with many employers introducing money purchase schemes for new staff, typically with lower contribution rates.
According to Duncan Brown: "Pensions remain an key and often expected part of an attractive reward package which can enable them to recruit and retain staff in an increasingly tight labour market.
“Employer contribution rates are being reduced in an environment where we should be saving more for our retirement, and a new division is being created in many workforces according to when you joined the firm."
Poor communication also arises an issue elsewhere. A third of employers ask staff not to talk about their pay and conditions with colleagues and a quarter of them ask staff not to talk about their pay and conditions with people outside work. Such secrecy, the CIPD says, encourages rumours and could lead to dissatisfaction, falling commitment, high absence rates and low productivity.
The survey also showed a continued trend towards a philosophy of ‘total reward’, with employers keen to ensure that their packages make them an employer of choice.
Despite the costs, more plan to introduce new and extended benefits than reduce them. But a mere seven per cent of employers plan to introduce family-friendly benefits in 2004. Flexible benefits will also become increasingly popular among employers in 2004, with Almost one in ten employers planning to introduce this type of scheme.
More than three quarters of employers carry out regular appraisals of their reward policies, but only six out of ten involve line managers in implementing the organisation's reward policies and practices, suggesting that implementation of these policies often leaves something to be desired.
There was also a rise in the number of employers carrying out equal pay audits this year. Nearly half of the employers surveyed plan to carry out pay audits in 2004, spurred on by the threat of government intervention, compared to under one in three employers last year, and one in five in the previous five years.
"This shows that progress is being made to address equal pay issues through Government encouragement rather than legislative enforcement," Duncan Brown said.