Employers rarely switch their pension provider over concerns that it may be too difficult, research from the Department for Work and Pensions has revealed, with resource burden thought to be the key consideration for employers when making pension decisions.

The research found that, although financial costs were important, employers were more concerned with the time cost burdens associated with administrative tasks, with this concern particularly prevalent across the switching and small pots research areas.

Indeed, the research showed that when an employer had switched provider, their positive experience relied heavily on good customer service, which was often linked to reduced time costs, as employers highly rated the new provider handling the admin burden.

In addition to this, employers expressed concerns as to who would be responsible for the burden of setting up and regulating the admin when asked for their views on two small pot consolidation options.

The scheme’s value for members was the second most considered factor in employers' decision-making process, with employers viewing value as investment returns, ease of communication and support from the pension provider, and the scheme’s flexibility.

Considerations around value for members was most prominent in employers' thoughts around choosing a pension provider, although it was also considered when contemplating new or changed initiatives, such as small pots consolidation and environmental, social and governance (ESG) investing.

However, the research found that employers predominantly considered the risk to investment returns when reviewing ESG investing options, with most stating that they would offer ESG schemes as an optional scheme rather than the default, due to a concern over poor investment returns.

There was variation between employers, however, as the research suggested that there is a particular contrast between proactive employers, often larger in size, who view and use pensions as a benefit, and those employers who see pensions as an obligation to fulfil.

The research suggested that proactive employers tended to take a more ‘paternalistic’ approach, where their decision-making processes regarding their workplace pension were impacted by their desire to ‘look after’ employees, as demonstrated in their approaches to contributions, employee engagement and even enrolment decisions.

Employer pension engagement was often influenced by the amount of knowledge or resource they had, according to the research.

This could prove problematic in relation to collective defined contribution (CDC) schemes, as the research found that "all employers" had low awareness of this new pension saving option.

The few employers who were aware had often only heard of the schemes in passing, and felt they were unlikely to consider using CDC schemes due to a variety of reasons including time costs, the security of the scheme or the suitability of the scheme.

Employee engagement levels also impacted employers' attitude to their pension provision, as the research found that a lack of employee awareness, along with high employee turnover, meant that employers often did not see pensions as a priority, as they believed their employees didn’t.

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