Companies have been urged to invest in pensions to free up the next generation of talent, after a report from Burness Paull suggested that businesses that fail to provide for employees’ retirement are storing up a potential staffing crisis.

The report, From Introvert to Extrovert: Welcoming pensions to the party, revealed that an ethical approach to investing in pensions and eradicating the gender pensions gap were among the key problems highlighted by senior business leaders faced with growing boardroom pension tensions.

It highlighted early data which suggested that the pandemic has further exacerbated underlying gender inequalities, such as around care-giving, arguing that the only way to address this is if businesses "fully commit to championing gender equality to help shift the dial".

In addition to this, “serious question marks” were raised around the value of auto-enrolment regulations, and how businesses can engage with younger members of the workforce to highlight the importance of pensions.

In particular, the report noted concerns that young people and employers are being lulled into a false sense of security with auto-enrolment and do not appreciate what the level of contributions being paid actually means for the financial future of employees.

It also highlighted the government's proposals to increase the earliest age at which pension scheme members can access their pension benefits as evidence of these issues.

In light of these concerns, it found that a realistic illustration of what an individual’s pension pot might look like at retirement age was considered the most powerful tool to change behaviour, with pension pot valuations considered "pretty meaningless" without the reality of what they mean in everyday life.

However, the report, which was compiled in partnership with author, Iona Bain, also emphasised the need for communication to be bespoke and personal, arguing that only then will employees sit-up and take notice.

It also stressed the importance of innovative approaches, suggesting that if employers could pay DC scheme contributions to match student loan repayments, and this was made tax advantageous, it could change young people’s saving habits.

Indeed, Bain emphasised that most young people face a number of competing saving priorities, and often prioritise saving for their first home above everything else, including their pension.

However, she explained that saving for home ownership can actually be "critical" for a young person's retirement prospects, as they will need a far bigger pension pot to fund their retirement if they continue renting.

“Employers and the pensions world need to acknowledge these pressures and provide well-rounded advice in the workplace – only then can we guarantee that a young person will be secure enough to commit to their pension," she stated.

She also acknowledged the low number of workers taking steps to compensate for poor workplace pension provisions, however, arguing that low opt-outs are not necessarily a sign that auto-enrolment is working.

"In my experience, young people either feel it’s too much of a hassle to opt out or they aren’t fully aware they’re opted in," she continued.

“This lack of positive engagement wouldn’t necessarily be a problem if we could guarantee that current contribution rates and default investment strategies are going to be adequate for future generations. The evidence suggests this is far from certain.”

Commenting on the report, Burness Paull head of pensions, Sarah Phillips, added: “Pension contributions can be a costly drain on the corporate purse, and are increasingly cited as an important ethical responsibility for businesses.

“Pension funding often competes for available cash with future investment, and the tension is twofold.

“The sustainability of a business is compromised if it isn’t making sufficient forward-facing investment. Yet if employees can’t afford to retire, businesses are not in a position to invest in new talent to shape the future.”

Share Story: