63% of SMEs reported that the auto-enrolment pension had a positive impact on the way employees thought about the business
Recent research conducted by Decision Architects has found that over 60% of SMEs reported that the auto-enrolment pension had a positive impact on the way employees thought about the business AND furthermore two thirds of these businesses are currently paying more than the minimum contribution – showing a higher level of engagement than might have been expected. While the scheme could have been seen as a box that employers had to tick to meet legal requirements … instead they are embracing auto-enrolment as an opportunity to improve their relationship with their employees.
64% of SMEs are currently paying more than the minimum contribution into staff auto-enrolment pensions
We have previously reported external research that shows that 50% of people say they will turn down a job offer if the benefits are not good enough, and 84% say benefits are essential in keeping their current job which rises to 93% for respondents aged 25-44. For employers to really attract – or retain – the staff they want, they must deliver better benefits packages, including higher contributions on the pensions they are now all obliged to offer.
93% of 25-44 year olds say benefits are essential if they are to stay in their current job
So, while on first sight the auto-enrolment pension may have looked like another government mandated administrative headache, many SMEs are seeing an upside for the business. That is not to say that it is not a nuisance – 48% of SMEs surveyed agree that it is a “logistical/administrative headache” and only 20% disagree – and as we would expect this is more acute in more complex multi-site businesses.
But while many SMEs have embraced the auto-enrolment pension as a win-win for the business and the employee, not everything in the garden is rosy. In a previous post we highlighted the need for greater understanding between employees, employers and pension providers if the scheme is to reach its potential, but this research suggests there is room for improvement. Only one third of these companies say they definitely or probably wouldn’t switch providers, 43% definitely or probably would and the remainder will investigate their options.
43% of SMEs will probably or definitely switch auto-enrolment pension provider in the near future
Dissatisfaction is highest amongst the larger SMEs (200+ employees) as well as the smallest SMEs in the sample (10-19 employees) – in both instances over 50% of these businesses definitely or probably would switch providers. Given the disparity in size their needs may well be different, but it appears that they are not yet getting what they need from their pension providers.
These figures give a strong indicator of the potential opportunity for pension providers – there are plenty of companies looking to switch, but how to capitalise on this? In future research we will explore some of the causes of dissatisfaction and gather views of SMEs on the current product offers (both good and bad)
What opportunity does this represent? The auto-enrolment scheme is in its relative infancy, and as such there are still many organisations which have not yet found a solution that works for them, as evidenced by the large proportion who are looking to switch providers.
There is no lack of engagement or motivation here, most companies want the best for their employees, and understand that the scheme can help in that regard, but there are still a number of barriers to a successful scheme. For pension providers there is an opportunity here to better understand and address these product or service issues … SMEs are willing to embrace the auto-enrolment pension for all the right reasons but there is some dissatisfaction with the tools available to them.
Research conducted amongst 300 UK based SMEs (10-299 employees) in Q.4 2018