Aviva's Working Lives report - Issue 2, February 2013


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A research report into employer and employee attitudes to workplace pensions, savings and benefits.

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Aviva's Working Lives report - Issue 2, February 2013

  1. 1. Working LivesA research report into employer and employee attitudesto workplace pensions, savings and benefitsIssue 2 – February 2013
  2. 2. Overview of the report• Working life in the UK today – pg 4 • wareness does not equal ‘engaged’ – the WEBS AJust under two-thirds (65%) of employees say their main workplace concern (Workplace Engagement in Benefits and Savings) Index – pg 13remains how their pay compares to the cost of living and just over a quarter The WEBS Index shows room for improvement in engagement levels among employers(26%) do not feel they have a good work-life balance. and employees.• Financial confidence wavers – pg 6 • The critical lever – communications and engagement – pg 14Nearly half (45%) of employers and almost two-thirds (60%) of employees say More than a third (35%) of employers say they have discussed what automaticthey are ‘not very’ or ‘not at all’ confident in the UK economy. enrolment means with their employees. However, 18% of employees do not feel they understand ‘very well’ or ‘at all’ the benefits their employer offers.• The corporate benefits scorecard – pg 7Almost two-thirds (65%) of employees say their salary is the most important aspect • Workers under pressure – pg 16of their job, but UK workers do agree that other benefits are important too. More Many of those on middle incomes and below spend more of their income on basicthan half (53%) of workers have access to a workplace pension, but 45% who expenses than the UK average, such as housing (36.16% vs. 30.86% - UK) and muchchoose not to contribute to one say they do not have the spare cash to do so. less on pensions than the UK average (3.52% vs. 14.88% - UK).• Transforming workplace pensions – pg 9 • Big business – the experience of very large companies – pg 17Now that automatic enrolment has started to roll out, 87% of employers Companies with 1,000-plus employees are further along in their automatic enrolmentcompared to 59% of employees are aware of the pension reforms. preparations and are more concerned with the on-going management issues and communication to employees.• Will I stay or will I go – pg 11A third of employees (37%) who are aged over 22 years and are not yet auto- • Case study – Aviva’s journey to automatic enrolment – pg 19enrolled say they will opt out, but 28% remain undecided. • Methodology – pg 19• Beyond pensions – the value of workplace benefits – pg 12Automatic enrolment will be the catalyst for 38% of employers to review theirbroader benefits package. Working Lives Report 2
  3. 3. Introducing Aviva’s second Working Lives reportMuch has changed in the world of corporate benefits since However, our research also shows that there remains a starkwe launched the first Aviva Working Lives report in May 2012. contrast in automatic enrolment awareness among employersAutomatic enrolment is already bringing pension saving to (87%) and employees (59%). While both of these have increasedhundreds of businesses and thousands of their employees, and significantly since May 2012 and there is a general agreementwill benefit up to 11 million workers by 20181. that automatic enrolment is a step in the right direction, there is still an overall reluctance to engage in workplace saving andThere is a great deal to learn from the larger companies who benefits. Engagement by employers and employees leavesare leading the change. The likes of Tesco, Sainsbury’s, Asda plenty of room for improvement, but at a time when continuingand Morrisons have been at the forefront of auto-enrolment economic uncertainty is presenting financial challenges.and at Aviva we’ve just completed our staging, having lookedat how best to meet the short and long-term requirements ofautomatic enrolment (see page 19). The challenge for employers and the broader industry is now movingThis second Aviva Working Lives report tracks the views of morethan 700 employers and 4,000 workers in the private sector*. from building awareness aboutThe findings present a complex and evolving picture of the automatic enrolment to actuallyattitudes of employers and employees to corporate benefits, at a influencing employee attitudestime of unprecedented change. and behaviours towards saving. Change takes time, and it remains a combined responsibilityEach employer is tackling this challenge slightly differently of employers, advisers and consultants, the Government, thewith the size of their business playing a major role. This is not The fact that so many employees say they cannot afford to Pensions Regulator (tPR), the Financial Services Authority (FSA)surprising, as many larger employers will undoubtedly have more save for their retirement, and yet there is strong support for the and pension providers, such as Aviva, to focus on this criticalresources to call on and will need to prepare for auto-enrolment automatic enrolment legislation, suggests that employers and the area of workplace savings and benefits.earlier than their smaller counterparts, but it does provide an wider industry need to focus on a deeper level of engagement. Employers need to think innovatively about ways of encouraging It’s important that we come together to do everything we can toopportunity to learn from those who have already made these employees to save, and adopt practical tools that help their provide employees with straightforward, value for money pensionschanges. In this report, we have chosen to include research workers make decisions based on their personal circumstances. and benefits that are clearly understood and consistently explained.results on the different sizes of companies**, where relevant, to And equally, that we give employers the support they need ashighlight the significant differences between employers. There is no doubt that employers are looking for cost-effective they transition to this new world of saving. There has never been aOverall, the report shows awareness about automatic enrolment ways to retain a loyal workforce. In difficult economic times, more important time to influence the nation’s financial habits andhas increased, with marketing campaigns on the subject having broadening a benefits package to include highly valued, non- no better place to start than the workplace.the desired impact. Many people are now beginning to at least pensions related options, such as life cover or critical illness cover,consider saving for retirement, and businesses say they are may prove an important step in influencing whether an employee Mark Noble chooses to engage in their financial planning in the workplace. Managing Director Health and Corporate Benefits, Avivaprogressing well with their automatic enrolment plans. Working Lives Report 3
  4. 4. Working life in the UK todayAutomatic enrolment started to roll out from 1st October 2012 and by the end of the year, an additional 600,000 employees were estimated to be saving into a pension2.While this is an excellent start, there are still many thousands of workers and employers who need to decide how to best tackle these changes while dealing with their day-to-day priorities and financial concerns.So what is the general sentiment on working life in the UK private sector workplace at the moment?A snapshot of working life - employees’ perceptions, enjoyment and concerns about their experience in the workplace Employees’ perception of work Employees’ enjoyment of work I am generally satisfied with the balance I am I don’t like where I work able to strike between 4% home and work 58% I only come to work I am able to derive for the money a sense of personal 13% satisfaction from I don’t mind coming the work that I do 60% to work, but would rather not 22% I work in a friendly working atmosphere I enjoy my work 64% 60% Employees’ average commuting time (minutes) Employees’ key workplace concerns Working in unsafe or unhygienic conditions 9% Bullying in the workplace 7% Lack of a pension / inadequate 121 - 180 minutes pension provision 4% 18% 91 - 120 minutes Lack of development opportunities 7% 33% 61 - 90 minutes Lack of opportunity for promotion 9% 32% 31 - 60 minutes Stress of the job 31% 38% 1 - 30 minutes Uncertainty about job security 46% 43% Level of pay compared to the cost of living 65% Mean (in minutes) 52 All stats taken from Q1 2013 Working Lives Report 4
  5. 5. Working life is a complex balancing act Employers’ key business concerns (Q1 - 2013) 55%While more than half (60%) of employees say they enjoy their work, this isdown from 72% in Q2 2012. Below inflation salary increases seem to be one All businessesof the main drivers behind this as 65% of employees say their key workplace Small businesses - 0-49 employees 50% 51%concern remains how their pay compares to the cost of living (up from 53% Medium businesses - 50-249 employeesin Q2 2012). Longer working hours are also likely to play a role as 26% of Large businesses - 250 or more employeesemployees feel they do not have a good work-life balance and 29% work for 45%nine hours or more each day. In sharp contrast, only 18% cited a lack of apension or inadequate pension provision as a chief concern. 43% 42% 42% 40%Employers’ business concerns have evolved since Q2 2012 as manytighten their financial belts in light of the continuing economicuncertainty, with 42% (compared with 51% in Q2 2012) stating that 37% 35%keeping ahead of the competition is their key worry. 33%As they focus on business survival, employers are becoming less concerned 30%about keeping up with employees’ pay/benefits expectations (13%, downthree percentage points from 16% in Q2 2012) and an increasing number 29% 28%(19%) are worried about cutting jobs (up from 6% in Q2 2012). 25% 27%Although the current economic climate might make it difficult to 24% 24%demonstrate financially, employers value their employees. Three-quarters 20%(74%) feel that it is difficult to replace people who leave with those of 20% 20%similar expertise. 19% 15% 16% 16%It is clear that companies will need to find mechanisms to engage and retain 15% 15%employees without substantially increasing their salary/wage bills. Indeed, 14% 14% 13%almost a third of businesses (32%) say they are looking for ways in the next 12% 10%12 months to motivate employees ‘without unduly increasing remuneration’ 10%and 31% are looking to ensure key employees stay with the organisation. 7%Employers are also more focused on maintaining headcount despite the 5%economic downturn (20%, up eight percentage points on 12% - Q22012). As employers look for cost-effective ways to retain the loyalty of 0%their employees, many may well consider extending their benefits package, Uncertainty about Adopting more Cutting jobs Keeping up with Keeping up with Keeping ahead ofwith flexible and non-pensions related benefits. the business’s ability efficient systems employees’ pay / new legislation, the competition / to survive in the / processes / benefits package e.g. pension innovating economic downturn technology expectations changes Working Lives Report 5
  6. 6. Financial confidence wavers Employers’ confidence in the financial situation of their business vs. employees’ confidence in their own financial situation Small businesses Medium businesses Large businesses EmployeesOverall, employees and employers differin their level of financial confidence, with 54% 54%employees less optimistic than their employers.Among employees, 60% say they are ‘not very’or ‘not at all’ confident in the UK economy,compared to 45% of employers. This falls 47%slightly to 41% in large companies (largecompanies are defined as those with morethan 250 employees).The difference is even clearer regardingfinancial matters. While 68% of employersare ‘extremely’ or ‘quite’ confident in theirbusinesses’ financial situation, only 37% of 34%employees are confident about their personalfinancial situation. Large companies are morebuoyant with 75% saying they are confident 29%about their businesses’ situation. 26% 21% 21% 18% 14% 14% 13% 12% 11% 8% 8% 6% 3% 3% 2% Extremely confident Quite confident Neither confident or unconfident Not very confident Not at all confident Working Lives Report 6
  7. 7. The corporate benefits scorecard: Who is saving for retirement?While 65% of employees say their salary is the most important aspect of their job (up 15 With 53% of employees having access to a workplace pension, it is worrying that only 38%percentage points on 50% - Q2 2012) UK workers do agree that other benefits are important. of workers are actively contributing to one themselves, and a further 4% say their employerIn comparing the benefits employees want with those they are offered, it appears UK contributes to one even though they do not.employers are working hard to meet their workers’ expectations. Employees in private sector firms report their pension situation as follows:Top five benefits employers offer vs. those most valued by employeesAnnual/performance related bonus 1 Annual/performance related bonus 2% say they pay into the pension their employer offers, but their employer doesn’tMoney purchase/defined contributionpension scheme 2 Money purchase/defined contribution pension schemeHealth Insurance 3 Health Insurance 36% 4% say their employer pays intoLife insurance/death in service 4 Life insurance/death in service say they pay into the pension their pension but they don’t their employer offers, asCompany car/car scheme 5 Company car/car scheme does their employer Employer offers Employee valuesTop five benefits valued by male and female employees Annual/performance related bonus 1 Annual/performance related bonus 35% Money purchase/defined contribution pension scheme 2 Money purchase/defined contribution pension scheme 11% say their employer 5% say their employer does not offer a pension Life insurance/death in service 3 Health Insurance offers a pension but neither of believe they are Health Insurance 4 Life insurance/death in service them contribute not eligible to join their company Company car/car scheme 5 Company share scheme/free shares pension Working Lives Report 7
  8. 8. How much are they saving Why are some people not saving? 5.55%for retirement? £1,386 The benefit of employer contributions – often seen as ‘free money’ 7.12% which employees would otherwise not receive – has been cited as aAviva’s Working Lives report shows the £1,778typical amount that a UK employee with key incentive for saving into a workplace pension3. However, it appearsa workplace pension is contributing to a Scotland the decision whether or not to save into a workplace pension is firmlyscheme is 5.50% of their salary (or £1,421 perceived as a practical, financial one.per year). The typical amount that a UK Either workers feel they can manage their daily expenses and afford acompany contributes to an individual’s pension, or they do not feel they can. Almost half (45%) of employeespension is 6.22% (or £1,607 per year). who do not contribute to a scheme they are offered say they simply 5.32% cannot afford it, 19% are repaying debts and 17% are saving for otherPension contributions Northern £1,210 things. Of interest, the number of workers who say they cannot afford 5.92%by employers and Ireland £1,347 to pay into a scheme has dropped 10 percentage points from 55%employees across the UK 6.22% N. West N. East (Q2 2012) which suggests that while general finances remain tight, £1,498 Employee 6.48% retirement saving is becoming more of a consideration. £1,560 5.84% £1,333 6.09% Employer £1,415 6.16% Additionally, 10% say they are too young to think about pensions, £1,432 8% feel they don’t have the information to make a decision and 6% 5.67%% % of salary say they have not had time to join. So it is clear that communication, £1,294 Yorks Humber engagement and education remain critical factors in creating a shift inEmployees in Northern Ireland employees’ attitudes to long-term saving.contribute the highest proportion E. Midlands 5.33%of their income (6.22%) £1,192 5.73% 6.26%Employers in Scotland contribute £1,409 £1,400 5.23%the highest proportion of 4.85% £1,263 6.03%employee income (7.12%) £936 £1,483 6.26% £1,511 5.52% W. MidlandsPension contributions £1,066by employer size E. Anglia 5.37% Wales £1,453 London 6.51% S. West 5.71% £1,682 4.88% £1,475 6.25% 4.89% £1,261 £1,691 £1,089 Large S. East Medium Small 5.74% £1,278 6.82% 5.83% £2,254 £1,927 Working Lives Report 8
  9. 9. Transforming workplace pensionsWhen the first Aviva Working Lives report was Employers awareness of the new auto-enrolment pension regulations (by business size)launched in Q2 2012, automatic enrolment had Small Medium Large Small Medium Largeyet to become a practical reality, but thousandsof employers are already contributing to Not aware Awareschemes and many more are preparing for theirstaging date.A great deal has been written about the 83% 89% 90% 17% 11% 10%importance of making employees aware of thebenefits of saving into a workplace pension. Employees awareness of the new auto-enrolment regulations (by age range)It is therefore significant to see employer 18-21 22-24 25-29 30-34 35-44 45-54 55-64awareness of auto-enrolment now stands at87% compared to 77% (Q2 2012). More Very familiarsignificantly, employee awareness has increasedfrom 31% (Q2 2012) to 59% (Q1 2013) –aided by initiatives such as the high profileDepartment for Work Pensions advertising 4% 9% 12% 11% 9% 15% 12%campaign. Moderately familiarBy their own admission, 13% of employers(23% - Q2 2012) and 41% of employees(68% - Q2 2012) say they are not familiar withautomatic enrolment. Perhaps unsurprisingly,17% of 22-24s have never heard of automatic 34% 42% 40% 41% 53% 50% 56%enrolment, while just 8% of 55-64s say this,which suggests that more age appropriate Not familiareducation could be initiated for those who arelikely to derive the greatest long-term benefitsfrom the pension reforms. 27% 33% 30% 32% 27% 23% 24% Never heard of it 35% 17% 17% 16% 12% 11% 8% Working Lives Report 9
  10. 10. Employers confident about planning progress: Not surprisingly there are still some employers who have yet to progress their plans: 13% of employers say they have not started discussing theMore than a third of employers (36%, the same as in Q2 2012) say they feel fully prepared for automatic enrolment and implications and 7% have made no plans at all. Small businesses (thoseunderstand what they need to have in place, while 19% say their planning is well advanced (down 3 percentage points with between 0 and 49 employees), with automatic enrolment stagingfrom 22% - Q2 2012). dates further in the future, are more likely to have not started discussingAs only a relatively small number of employers have actually begun automatic enrolment, many of these companies may not yet automatic enrolment (22%) and to have not made any plans (20%).have encountered the full complexities of planning for the long-term compliance requirements. However, only 2% of medium sized businesses (those with between 50 and 249 employees) and 1% of large businesses say they do notEmployers’ readiness for introducing auto-enrolment have any plans. 7% 2% Employees support automatic 2 13% Need to start 1 1% 20% No plans enrolment changes: START discussion 22% Employees’ support for the pension reforms bodes well for the future. 13% Almost two-thirds (65%) of employees say automatic enrolment will encourage saving and 59% agree with the decision to pass legislation to 6% 27% automatically enrol workers. With the advent of this new legislation and increasing dialogue on the subject, more people (62%) see pensions as 16% 9% the best way to fund their retirement (56% - Q2 2012). 19% 7% 21% 3 Started planning Not surprisingly, 61% see the state pension as a very important part of funding for their retirement, which suggests that the culture of placing 4 some reliance on the State for old age may continue well into the future. Well advanced When asked what they think the potential impact of automatic 25% enrolment might be, those who have yet to be automatically enrolled 23% FINISH and are not contributing to a pension say they will receive less money in 21% their pay packet (35%) – a key consideration when 65% rate salaries as 36% 27% the most important aspect of their job. This suggests that the notion of 5 ‘free money’ from employers’ pension contributions needs to continue to Fully 48% be a focus of communication campaigns. prepared All businesses Small businesses Medium businesses Large businesses Working Lives Report 10
  11. 11. Will I stay or will I go – Expectations among employers and employees about automatic enrolment opt outsemployees remain uncertain: Employers’ view Employees’ view Anticipated opt outs among employees Intentions regarding auto-enrolmentEmployees can opt out of a compliant pensionscheme and those who feel they may struggle I will stay in thefinancially are likely to consider this option. 8% scheme and beDespite the positive signs of increasing awareness, very pleased thatthere is a huge amount of work still to be done if I have a pension 19% 8%auto-enrolment is to prove a success. Central 13%to this is translating employees’ awareness into 34% 9%positive action to not only stay in a pension 28% 15% I will opt outscheme, but save enough for their retirement. of the scheme immediately asOverall, 37% of employees who are currently 6% 17% Business size I cannot affordnot auto-enrolled say they will opt out, which to make the 47% Inner circle = smallis unchanged from Q2 2012. While this shows contributions Middle circle = medium 11%a stable and largely expected opt out rate, 22% Outer circle = largethere is an increasing number of undecided I will opt out of the 3% scheme as I preferworkers, which at 28% is up seven percentage 7% 16% 7% 20% to make my ownpoints on 21% - Q2 2012. arrangements 10%However, 36% (43% - Q2 2012) of employees 13%who are currently not auto-enrolled say they will 6% I will stay in the 13%stay in an automatic enrolment scheme. This 11% scheme as I wouldn’tbreaks down into: 19% say they will be pleased bother to opt out 9% I will stay in theto have a pension, 6% will contribute more 11% scheme and 6%than the basic amount and 11% will stay in the None contribute more 1% - 9% Leave the schemescheme as they cannot be bothered to opt out. than the basic 4% 10% - 24% when I get around amount 25% - 49% to itEmployers have mixed views on potential 50% - 74%opt out rates, with 38% undecided on the 75% - 100%percentage of their employees likely to opt out Don’t knowand 10% saying no one will opt out. A quarter Don’t know 28%(25%) of employers think that more than 25%of employees could opt out, and 27% sayunder 25% may opt out. Working Lives Report 11
  12. 12. Beyond pensions – the value of workplace benefitsWhile automatic enrolment has put the focus Reviewing benefits packages:on workplace pensions, many UK privatesector employers realise the value of offering With 39% of employees saying that their employer does not offer any of the traditional benefits (such as annual bonus, health insurance or aa ‘well rounded’ benefits package. Almost half company share scheme), the advent of automatic enrolment may well be the catalyst for change or increased communication. The fact that 38%(44%) offer benefits as they believe it helps of employers say that they are likely to review their companies’ benefits packages at the same time as reviewing their automatic enrolment pensionwith recruitment and retention, 43% do so as provision is positive news. Medium and large employers are more likely than small businesses to say they will review their benefits package.they want the best for their employees, 28% However, 39% of all employers say they will not be reviewing their benefits at the same time as their automatic enrolment provision.believe it helps them to keep pace with their How often employers review their employee benefits packagescompetitors and 24% say it is morecost-effective than a salary equivalent. Small businesses Medium businesses Large businesses 55%Excluding pensions, the top four most common 49%benefits are: Health Annual/ Insurance 36% performance related bonus 36% Company car/ car scheme 26% 52% 28% Life insurance/ 19% 19% death in service 17% 16% 36% 10% 14% 10% 11% 7%Of those types of risk-related products that can 6% 3%be linked to a pension, employees say by farthe most valued is income protection (58%), Every 6 months Every year Every 2 years Less often Neverproviding monthly payments to cover costs inthe event of ill health. About a third (34%) of Two-thirds (62%) of businesses say that the benefits/reward package they offer employees is a key part of their annual strategic planning process,employers say they currently offer some or all rising to 71% in large businesses, and 60% seek feedback from their employees at least once a year. There are still a significant number of employersof their employees life cover, linked to their who are not as engaged with their employees in seeking feedback. For instance, 13% say they never ask for feedback from employees as to howpension, rising to 52% in large businesses. appropriate the package is, and 27% only discuss this every two or more years.And 41% of employers say they ‘will’ or ‘may’ A contributing factor to this lack of dialogue is likely to be the fact that despite 56% reviewing their benefits offering at least once a year, there areconsider linking an employee benefit such still 32% who say they do this every two years at most, and 12% who say they never do it.as a group life cover in this way – creatinga potentially powerful way of encouraging As automatic enrolment prompts more employers to review their benefits package, driven also by the need to find cost-effective ways to enhance their overallemployees to stay in pension schemes. reward package, it will be essential that they enter into a two-way conversation with their employees about the types of benefits that will best suit them. Working Lives Report 12
  13. 13. Awareness does not equal ‘engaged’ – the WEBS IndexAs part of the Working Lives report, a new Employer WEBS Index by size of employercorporate benefits tracker – called theWorkplace Engagement in Benefits and Savings(WEBS) Index – has been developed to assessthe overall level of engagement in workplacepensions and benefits: including awarenesslevels, ownership and enthusiasm on the partof UK private sector employers and employees.These factors were given different weightingsto produce a score out of 100 that will betracked over the coming months and years.The initial mean WEBS Index scores are:employees (38 out of 100) and employers(37 out of 100), suggesting there is plentyof room for improvement. Of the variousemployees tracked, the most engaged arethose earning more than £50,000 (57 outof 100), and engagement rises in employersif they have 1,000-plus employees (51 outof 100).While the primary aim will be to see howengagement varies as auto-enrolment comesinto play in the coming years, there are someearly interesting results. Engagement inbenefits increases as employees earn more,men are typically more engaged than women,and more engaged employees tend to enjoytheir jobs more. In terms of employers, there isa clear link between the size of the companyand level of engagement, illustrated here. Large businesses Medium businesses Small businesses Working Lives Report 13
  14. 14. The critical lever – communications and engagementHow employers communicate with their employees about workplace benefits will be instrumental How often employees want to hear about workplace savingsto the success of automatic enrolment as well as the take up of wider benefits.Employers say they speak to their employees about pensions when they join the company (38%),when changes are made to the scheme (29%) or when legislation changes (26%). Nearly a quarter(21%) use an annual statement as the basis for additional communications about workplace 24% 7% Once a year is When somethingbenefits, 20% have an intranet site with regularly updated information, 15% have a dedicated enough in my 19% 15% changes (e.g. Ipoint of contact so people can ask questions and 17% hold discussions using their line managers. annual statement On a regular basis, Accessible at all get promoted) similar to my times via a secureWhile this may not seem frequent enough, some employees do not demonstrate strong opinions payslip details intranet siteabout communications as 14% say they don’t know when they want to receive communications,and 11% ‘don’t care’. However, 24% of employees say they are happy with communications 6% 11% As part of anabout their savings and options via their annual statement, a further 5% are happy with speaking 5% I don’t want toabout their pensions less often than annually, 6% as part of an on-going discussion with their on-going discussion Less than 14% know (I’m not with my employer Don’t know interested)employer, and 7% only ‘when something changes’. once a year about what is (2-3 years) available and why ISome employees indicate a desire to have more frequent communications, with 19% saying they should savewould like to hear about workplace savings on a regular basis, similar to their payslip, and 15%saying they would like information accessible at all times via a secure intranet site.When employers communicate with workers about their pensions How employers communicate with workers about their pensions All businesses Small businesses Medium businesses Large businesses 49% We have an intranet site with regularly updated 2% 12% 37% 20% information available 45% We have a query point (e.g. a nominated person 15% 8% 16% 21% 38% 38% 38% 36% or intranet site) so people can raise questions 33% 34% 34% 29% As part of regular line manager conversations 17% 14% 17% 20% 28% 23% 26% When people are promoted or have salary increases 10% 8% 11% 10% 19% 22% 21% 18% 17% 16% 14% 10% On a regular basis via email 18% 9% 14% 26% 8% 4% 5% We use social media to encourage discussion 1% 0% 2% 2%The benefits are The pension When we make Along with the When legislative We tend not toexplained when provider/trustee changes to the annual statement changes happen communicate staff join the communicates scheme of the fund’s value with people about All businesses Small businesses Medium businesses Large businesses company with them their pensions Working Lives Report 14
  15. 15. The communication drum-beat: Engagement point:As we move more into automatic enrolment, it is likely that a regular drum-beat of relevant information and news will Automatic enrolment provides employers with a real opportunity to notprove more effective in engaging employees, as will self-serve planning tools that help employees make practical, personal only enhance their benefits offering but also to start the dialogue withchoices about benefits, including pensions. employees on this topic, and 62% of companies have started providing information.Additionally, when asked what would most likely encourage them to save more for their retirement through theworkplace, different styles of communication are favoured by employees. Almost a quarter (23%) of employees say being Many companies say they have begun the dialogue on automaticshown ‘personally’ what they need to save would encourage them to save more, while 14% say being shown the benefits enrolment with their employees, covering a range of subjects:of saving and 12% being shown how to manage their money better would have this effect. This personalisation ofinformation, making it wholly relevant to the individual employee possibly through face-to-face conversations, is therefore • 33% have covered the contribution levels that employees will make,likely to become increasingly important as an engagement lever. Regardless of communication styles, more than half of and 35% the contributions by the employer.employees (55%) admit an increase in pay would encourage them to save more. • 35% say they have discussed what automatic enrolment means for their employees and the options open to them.How different communications approaches would encourage employees to save more However, with financial advice being a heavily regulated and complex 9% If someone showed me how to save more area, 25% worry about communicating the right messages to their employees and 19% are concerned about correctly outlining the benefits of their pension scheme. Less than half (47%) say they have If someone showed me not experienced any communication issues relating to pensions and what I personally need automatic enrolment. to save for retirement 23% Companies are right to be concerned as 18% of employees currently feel that they understand little about the benefits their employer offers, If someone showed me what 14% the benefits of saving are and only half (53%) say they understand them ‘reasonably’ or ‘very well’. However, knowledge increases as people age from 38% (22-24 year olds) who understand their benefits package well to 64% (55-64 year olds). This seems to highlight the fact that employers need to carefully consider how they engage with the different age groups, yet 18% say they currently will not adapt their communications for the under-35s and 14% do not feel it is the employer’s role to encourage saving. Thankfully, these percentages are relatively low. The typical employer says they will adapt their communication methods for younger workers If someone showed me what with 26% explaining the tax and employer contribution benefits, 21% I might lose if I didn’t save 12% 12% If someone showed me how to manage my money better highlighting how they are giving away ‘free money’ and 18% saying they will talk less about retirement and more about long-term savings. Working Lives Report 15
  16. 16. Workers under pressureAutomatic enrolment stands to benefit those millions of employees in the UK who do Lack of current benefits:not have any savings for their retirement. To ascertain the challenges that they mayface, the Working Lives report looks at a sub-group of the total sample: people who While arguably, this ‘workers under pressure’ group comprises people who could use workplace benefits toearn less than £35,000 a year and save less than 5% of their income. They are help them make the most of their money, 53% say they work for an employer that does not offer traditionalall also supporting children under 21 or elderly relatives, and pay rent or a mortgage. benefits, such as an annual bonus or life insurance (39% - UK).Most importantly, the employees in our ‘workers under pressure’ group say They are also typically less likely to be saving into a workplace pension with 50% saying that their employerthey lack confidence in their financial situation. does not offer a pension (35% - UK) and just 29% paying into a workplace pension their employer also paysAll this comes at a time when the Office for National Statistics (ONS) and Eurostat4 into (36% - UK). Of those who have a workplace pension, they pay in just 3.86% of their salary (5.50% - UK)have released figures which show that in 2011 the standard of living in the UK and their employers contribute 5.49% of their salary (6.22% - UK).dropped two places to sixth highest in Europe. This lack of workplace benefits may well be due to the fact that 50% of those under pressure work for companiesThe differing fortunes of workers under pressure with fewer than 100 employees and are therefore less likely to have access to a workplace pension, particularly as their employer is unlikely to have reached their automatic enrolment staging date.Work for an employer that does 39% 53%not offer traditional benefits Juggling priorities and increasingly worried:Work for an employer that While some of this group earn more than the typical full-time UK salary (£26,500)5, they spend more of their 35% 50%does not offer a pension income on basic expenses such as housing (36.16% vs. 30.86% - UK) and food (19.72% vs. 18.46% - UK) but less on items such as entertainment (5.98% vs. 9.50% - UK) and even less of their income goes towardsPaying into a workplace pension savings, including pensions (3.52% vs. 14.88% - UK). 29% 36%their employer also pays into If they were offered a 20% increase in their salary, the largest proportion say they would use it to repay debt (52%Would spend a 20% salary vs. 33% - UK), and pay household bills (31% vs. 14% - UK) rather than to save into a pension (21% vs. 26% - UK). 33% 52%increase on debt repaymentsWould spend a 20% salary 14% 31% Interested in automatic enrolment:increase on household bills While ‘workers under pressure’ are less familiar with the new pensions legislation, with 52% saying they haveWould put a 20% salary increase never heard of it (41% - UK), they do express an interest when it is clearly explained. More than half (63%) 21% 26% say it will help people to save for the future and 56% agree with the Government introducing automatictowards pension contributions enrolment legislation.Key workplace concern is their level 65% 80% Those under pressure are more likely to opt out immediately as they can’t afford it (25%), than the averageof pay compared to their cost of living UK employee (17% - UK). The overall automatic enrolment opt out rate for ‘workers under pressure’ (36%)Not at all/not very confident remains similar to the UK average (37% - UK) – due mainly to 16% of UK employees saying they will actively 60% 85%in the UK economy choose to opt out as they prefer to make their own individual pension arrangements (compared to 2% - workers under pressure). Workers under pressure UK average Working Lives Report 16
  17. 17. Big business – the experience of very large companies(1,000-plus employees)Among companies with 1,000 or more employees there are significant differences in their experience Communicating change:of workplace savings and benefits compared to the average UK employer. The majority of thesecompanies (59%) have multiple UK and international sites (22% - UK), with more sophisticated online As they have the resource, these employers are more likely to communicate with their employeescommunication infrastructures, for example, an intranet site. regularly about pensions, and show a high degree of diligence in conveying the benefits and options with automatic enrolment.They are also more confident about their companies’ financial situation (76%, up eight percentagepoints on the UK average of 68%), and less concerned about their ability to survive the economic Asked about the types of information provided to employees about theirdownturn (16%, down 13 percentage points on the UK - 29%). auto-enrolment scheme, very large employers focus on:These very large employers are generally more confident about the UK economy (27%, up two Levels of contributionpercentage points on 25% - UK), and more so than small businesses (19%). However, with their the employer will makelarge workforces they indicate more concern about cutting jobs (30%, up 11 percentage points onthe UK - 19%). At a time when they are leading the charge on automatic enrolment, big businesses 53%are no more inclined than others to increase their spend on benefits in the coming year. (vs. 35% - UK)Leading the way on automatic enrolment 39% 51% (vs. 23% - UK) (vs. 35% - UK) What automaticAs might be expected, these larger employers are further along in understanding, not just the Fund choices enrolment meanspracticalities, but the impact and benefits of automatic enrolment. Therefore, it is very positive for employeesthat companies with 1,000-plus employees agree with the Government’s decision to make theworkplace the focus for automatic pension saving (73% vs. 58% of all UK businesses).Most difficult and challenging aspects of automatic enrolmentfor very large employers 42% 49% Levels of (vs. 26% - UK) (vs. 33% - UK) Very large employers Total UK employers Charges contribution that apply the employee to their pension will make Managing the cost 43% 42% 44% (vs. 28% - UK) On-going compliance management 33% 25% Tax benefits Communicating automatic enrolment to employees 32% 23% However, they indicate that due to their size they can have issues around communicating with employees Updating the existing pension 30% 24% across multiple sites (28% vs. 14% - UK) and reaching those who don’t have email access (15% vs. 9% - UK). Working Lives Report 17
  18. 18. In conclusionAviva’s Working Lives report shows that there is still significant work to do before automatic enrolment can be called a success,and there are still a number of uncertainties – not least the interplay between workplace pensions and the wider benefits on offer.What role a choice of wider benefits will play in engaging employees in workplace saving is yet to be fully seen. It is likely though, thatthe more employers understand the needs and attitudes of their employees and match these to relevant benefits packages, the strongerengagement is likely to be.That is not to say that every employer should offer a multitude of benefits; more important is the recognition that when it comes toemployees ‘one size does not fit all.’ A number of carefully selected benefits, offered by an employer which has taken the time tounderstand its workforce, along with a straightforward and modern auto-enrolment scheme are likely to be highly valued by employees.Insights from this report give some strong indications for consideration, particular in relation to automatic enrolment: Employers should By reviewing their entire benefits offering, In challenging economic times – when begin their planning including their pension, employers can many employers are looking to attract process early, at least better match what their employees want and retain employees – relevant and 18 months ahead of and need with what works best for their attractive benefits choices could grow their staging date. business. in significance. Communicating with employees Communication and engagement will Focus needs to remain on in a way that is relevant and be critical to the success of automatic building on the stronger based on a deep understanding enrolment, and creating a way of awareness levels among of the characteristics of the personalising savings and benefits options employees to encourage workforce is vital. may encourage employees to save. saving for the longer term. Working Lives Report 18
  19. 19. Appendix 1 MethodologyCase study: Aviva’s journey to automatic enrolment The Aviva Working Lives Report was designed and produced by Aviva and Wriglesworth Research in association with ICM.Aviva’s staging date was 1st February 2013. Aviva is using its existing employee moneypurchase scheme as the core pension for automatic enrolment. Almost all employees *4,012 private sector employees and 760 private sector employers were interviewed in two(approaching 99%) already take part in the scheme, with minimum contribution rates waves, producing the first report in Q2 2012, and this second report in Q1 2013. All interviewsof 2% employee, 8% employer, rising to 8% employee, 14% employer. An innovative were conducted online and the sample targeted to:communication policy with members has helped put the scheme on a strong footing. l Ensure there was a comprehensive cross-section of the UK working populationBy the time the staging for automatic enrolment arrived, the project team had been l To capture similar people as those interviewed in wave oneworking directly with the administrators and trustees over an extensive period of time. l This data was combined with additional information from the sources listed below and usedAt staging, Aviva only needed to auto-enrol approximately 332 employees, and invited to form the basis of the Working Lives Report in February 2013.an additional 78 people to join the scheme despite not qualifying automatically becauseof their age or earnings. **For the purposes of this report, a ‘small business’ is a company with 0-49 employees, a ‘medium company’ is 50-249, and a ‘large business’ is 250 or more employees. A subset of the large businessThe project team established the best way to work with the legislation and guidance to category, called ‘very large business’, is included and comprises businesses of 1,000-plus employees.maintain continuity for members and auto-enrol all new Aviva recruits in line with theexisting process. Contribution rate requirements were measured against qualifying earnings, Additional data sources/information includes:ensuring Aviva comfortably met the initial phased requirements. 1. Automatic enrolment into a workplace pension, key facts, Department for Work Pensions, September 2012.Having made the key decisions about automatic enrolment, Aviva ensured its systems andprocesses were compliant with the legislation – noting any risks and acting accordingly. 2. Department for Work Pensions – Automatic enrolment announcement – October 2012.This was a considerable task, involving a range of departments including recruitment, 3. Bryan, M et al. – Who Saves for Retirement? Institute for Economic and Social Researchpayroll, legal, tax, human resources, staff pensions and the trustee. (ISER) Strategic Society Centre – 2011. 4. Office for National Statistics - News Release - UK standard of living drops to sixth highest inWhat has Aviva learned from auto-enrolment? Europe – December 2012.l 5. Office for National Statistics – Average UK Salary for Full-time Workers – November 2012. Engaging early with stakeholders has been fundamental to a successful outcome.l For further information on the report or for a comment, please contact: Auto-enrolment requires a keen focus on managing a clear, end-to-end process, which takes account of every step from assessing the best pension provision, to Diane Mangan on-going compliance around enrolments and opt outs. Senior Media Relations Managerl The Aviva scheme is in excellent shape, with high participation and attractive Aviva contribution rates. 01904 684164 07800 691714 diane.mangan@aviva.co.uk Working Lives Report 19
  20. 20. 106002413 02/2013 © Aviva plc