Can pensions aid employers in the war for talent?

How has the jobs mar­ket evolved over the past cou­ple of years?

There is a short­age of skills across many indus­tries and the ‘war for tal­ent’ that ana­lysts have spo­ken about in recent years is real­ly com­ing to the fore. Some econ­o­mists are refer­ring to the cur­rent time as the ‘Great Res­ig­na­tion’, as the num­ber of peo­ple look­ing to change jobs is high­er than ever.

A glob­al sur­vey by Microsoft dis­cov­ered that 41% of work­ers are con­sid­er­ing quit­ting their job, ris­ing to more than half of those aged 18 to 25, while a UK study by Perse­nio found 38% of work­ers plan to quit with­in the next year. A lot of this is pent up demand after peo­ple took a wait-and-see approach dur­ing the Covid cri­sis, but the pan­dem­ic has also changed what peo­ple expect from their employ­er.

How is this affect­ing com­pa­nies’ employ­ee val­ue propo­si­tion?

The employ­ee val­ue propo­si­tion is chang­ing con­sid­er­ably, as employ­ers look to adapt to a chang­ing mind­set among work­ers. The pan­dem­ic has shown that employ­ees can work pro­duc­tive­ly remote­ly and this has opened people’s eyes to the big wide world. I was recent­ly asked by an employ­ee if they could move to Crete and work from there. My daugh­ter works for a busi­ness in Kent but lives in Glas­gow.

The flex­i­bil­i­ty of remote work­ing was pre­vi­ous­ly seen as a perk, but for many this is now offered as stan­dard. This means employ­ers need to be able to dif­fer­en­ti­ate in alter­na­tive ways. Work-life bal­ance is now more impor­tant than salary for two-thirds of UK work­ers, a recent Rand­stad study found. Salaries are almost becom­ing neu­tralised, with staff increas­ing­ly ask­ing, ‘What else am I get­ting?’ Beyond salary and bonus, pen­sions are the most valu­able ben­e­fit you can get from an employ­er.

Do pen­sions real­ly mat­ter to younger work­ers when they are choos­ing a job?

They do to an extent, but if we switch ‘do’ with ‘should’ in that ques­tion, then the answer is ‘yes, they absolute­ly should’. The chal­lenge is that a lot of peo­ple don’t real­ly under­stand pen­sions, despite mil­lions of new savers join­ing pen­sion schemes since the intro­duc­tion of auto­mat­ic enrol­ment. There is still a big edu­ca­tion gap that we as an indus­try, and employ­ers, need to fix.

When I start­ed work­ing 30 years ago, pen­sions were based on a dif­fer­ent sys­tem. Nobody real­ly paid atten­tion to them, because you just got a pro­por­tion of your salary when you retired. It’s now a very dif­fer­ent, sav­ings-based sys­tem that requires more engage­ment at a younger age to get a bet­ter return. Unfor­tu­nate­ly, the pen­sions iner­tia from pri­or gen­er­a­tions has lived on. We need to find ways to change that because pen­sions can be a fan­tas­tic tool to attract and retain tal­ent. They are a key part of the employ­ee val­ue propo­si­tion because it’s not just about reward­ing peo­ple today but also look­ing after them fur­ther on in their life.

What is it going to take to get peo­ple more engaged in their pen­sions?

We need a time machine trans­port­ing younger work­ers for­ward to their 50s and beyond, so they can under­stand what kind of life they will want to live then and, more impor­tant­ly, how they will be able to afford it.

Many of our desires remain very sim­i­lar, such as trav­el, want­i­ng a nice place to live and a nice car, but there are dif­fer­ent pri­or­i­ties too. You might be putting your kids through uni­ver­si­ty or try­ing to pay your mort­gage off. What income will you require to do all of that and live a com­fort­able life, and are you sav­ing enough into your pen­sion now to enable that? The answer, in most cas­es, is no.

A time machine would help young work­ers under­stand that. And while it might sound like sci­ence fic­tion, there are tech­nol­o­gy tools we are devel­op­ing now to pro­vide that kind of expe­ri­ence. We need to vir­tu­al­ly take peo­ple to dif­fer­ent points in their life and show them how it feels.

How is Capi­ta sup­port­ing trustees and com­pa­nies in this area?

As well as devel­op­ing online func­tion­al­i­ty, which will help to cre­ate the time machine con­cept to sup­port bet­ter retire­ment plan­ning and deci­sion mak­ing, we also sup­port employ­ers by man­ag­ing their auto-enrol­ments and through com­mu­ni­ca­tion. We work with trustees and employ­ers to put togeth­er com­mu­ni­ca­tion plans to edu­cate and raise aware­ness.

We also have a data reme­di­a­tion busi­ness, which is key. As pen­sions are a long-term sav­ings pot, it’s a chal­lenge to keep pen­sions data ful­ly accu­rate over an individual’s work­ing life. This is unlike bank­ing data, for exam­ple, because peo­ple realise very quick­ly if some­thing in their bank account isn’t right. We work with employ­ers and pen­sion trustees to show them what good data looks like, the qual­i­ty of the data that they have got and what action they need to take to get it to the right place.

How do you see the pen­sions land­scape evolv­ing in the com­ing years, par­tic­u­lar­ly as it col­lides with the war for tal­ent?

A pen­sions dash­board will launch from 2023 pro­vid­ing indi­vid­u­als with much more infor­ma­tion about what they have. If you’ve had lots of dif­fer­ent jobs, which is increas­ing­ly like­ly in the gig econ­o­my, you will final­ly be able to see every­thing in one place. The key will be help­ing peo­ple to make deci­sions based on that aggre­gat­ed infor­ma­tion.

A big ques­tion we will need to answer as an indus­try is whether pen­sion pots will start to fol­low indi­vid­u­als rather than being dri­ven by employ­ers, as is being intro­duced in Aus­tralia. This own­er­ship will see pen­sions become an even big­ger part of employ­ment con­ver­sa­tion. Your ques­tion to your new employ­er becomes, ‘How much are you going to pay into my pen­sion pot?’.

Along­side the edu­ca­tion time machine, peo­ple will know what they need to put into the pen­sion pot to get to where they want to be when they are 50, 60, 70 years old and beyond. The work­ing world is very dif­fer­ent now and we must all evolve to embrace not only tech­nol­o­gy but a more flex­i­ble pen­sion sys­tem.

For more infor­ma­tion, vis­it content.capita.com/pensions

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