In the ever-evolving landscape of Defined Contribution (DC) pension schemes, the goal remains constant: achieving good member outcomes. For HR and Reward directors, Pension Scheme Managers, Employers, and other stakeholders, ensuring that pension schemes are optimised for the benefit of your members is paramount.
Pensions are an important piece in the employe benefits jigsaw. This blog explores the critical components that contribute to this goal and introduces Broadstone’s innovative Benefits Barometer, a new digital self-evaluation tool.
The Pillars of Good Member Outcomes
1) Investment
Effective investment strategies are crucial for maximising returns on contributions. A well-diversified portfolio that balances risk and reward can significantly impact the retirement savings of members in a positive way.
The right investment choices, including a strong default investment strategy can help mitigate risks associated with market volatility and economic fluctuations, ensuring that members’ savings grow steadily over time.
Let’s not forget too, the importance of Environmental, Social and Governance (ESG) when exercising investment choice. There is a growing body of evidence that suggests ESG factors are increasingly important to members too when making investment choices, so sponsoring employers take note.
Imagine an organisation with strong brand values and an authoritative voice on environmental and social issues, having no oversight on the underlying investments and choice of how “its employees’ pension funds” are invested. Imagine the potential reputational damage this could cause.
Ultimately, any investment strategy (including the default) must be aligned to the values of the sponsoring company and the needs of its employees, the members.
2) Governance
Strong governance ensures that the pension scheme operates in the best interest of its members. It involves oversight, accountability, and transparency in decision-making processes.
For employers, pension managers and other interested parties, robust governance practices not only safeguard the interests of employees but also enhance the credibility and reliability of the pension scheme. This commitment to governance reflects positively on the organisation, demonstrating a dedication to responsible management and employee wellbeing.
Good governance practices can also help identify and manage potential conflicts of interest, ensuring compliance with regulatory requirements, and fostering trust among members.
3) Member Support
Providing comprehensive support to members is essential for helping them make informed decisions about their retirement savings. This includes education, communication, and access to guidance and support at the point of need.
Member presentations, including the chance to ask questions in either an open forum or via an individual, non-advised meeting, continue to land well, particularly when supported by rich written and digital content. Broadening member support to include access to financial wellness can build confidence and lead to increased financial resilience. After all, a pension is the cornerstone of a good financial plan.
Experience suggests that effective member support can enhance engagement, improve financial literacy, and empower members to take proactive steps toward securing their financial future.
3) Charges
Keeping charges low is vital for preserving the value of members’ savings. High fees in the shape of Annual Management Charges can erode returns and negatively impact retirement outcomes.
Transparent and competitive fee structures ensure that members receive maximum value from their contributions, enhancing their overall retirement savings.
When was the last time you reviewed plan charges? The scheme you have now is likely to be very different from that when you negotiated terms with your incumbent. How do the charges that ‘you’ (your member actually) pay compare to what everybody else pays? Could you get more from your existing pension provider?
5) Contributions
Adequate contributions are the foundation of a successful pension scheme. We know that encouraging higher contributions can significantly enhance retirement savings. As a minimum, the employee should take advantage of any employer match.
That said, sensitivity is advisable in the knowledge that members will experience different financial challenges and may simply not be able to invest more as they juggle rent, higher mortgage costs, childcare fees and other bills and expenses. Are other strategies needed? Should the employer introduce flexibility in support of its member contributions? When was the last time you reviewed pension contribution design?
There is no doubt, future success will be shaped by the level of contributions on offer (and paid into the pension scheme) and the amount of contributions invested will go a long way in helping members achieve their retirement goals and maintain their standard of living post-retirement.
Introducing Broadstone’s Benefits Barometer
To support the goal of achieving good member outcomes, Broadstone has developed the Benefits Barometer, a digital self-evaluation tool. Accessible via desktop, tablet, and optimised for mobile, this digital tool guides users through a series of simple questions across the five key areas mentioned above.
Features of the Benefits Barometer: What can you expect from it?
- Practical Tips: Offers actionable insights tailored to your scheme’s specific needs.
- Benchmarking Commentary: Includes shared insights and commentary based on the results of the most recent Broadstone Employee Benefit Survey
- Priority Actions: Identifies key areas for improvement based on a simple Red-Amber-Green (RAG) status, helping you prioritise actions and delivering all-important takeaways.
- Comprehensive Report: A detailed written report summarising findings and recommendations, including a Free of Charge meeting to walk you through the results and what they mean for you, will be made available.
By leveraging the Benefits Barometer, this digital tool will help ensure that your pension scheme is on the right path to deliver good member outcomes. This tool offers empowered support. It will help you think strategically, perhaps challenge the status quo and through its reporting, it will provide you with thoughts on areas to prioritise.
In conclusion, achieving good member outcomes in DC pension schemes requires a holistic approach that encompasses investment, governance, member support, charges, and contributions. With tools like Broadstone’s Benefits Barometer, you can take proactive steps to evaluate and improve your scheme, ensuring it meets the highest standards of excellence.
Watch this space for further information on the Broadstone Benefits Barometer.
Broadstone is well positioned to help schemes of all sizes in tackling and addressing challenges associated with DC Pension Schemes including financial wellness.
Explore a broader understanding of our employee benefits and overall wellbeing, too.
