Will compulsory workplace pensions change the culture of how pensions are viewed by Directors and Employees?

I think so.

There was a time when Companies didn't need legislation to force them to provide a pension scheme for their workers. There was a time when schemes were set up and the Directors (for the most part) accepted that they had a responsibility to help their staff save for their old age and took on the Trusteeship accordingly. Employees were told how much they needed to pay and what they would get and the Trustees and Company took care of the rest.

So what changed?

Firstly UK PLC has seen a trend away from large employers to smaller SME's. Smaller SME's seem to convince themselves that they are too busy and that large business' has more time for such things.

Secondly, people just kept on living longer and longer making the cost of providing occupational schemes more and more cost prohibitive. In addition, largely thanks to Maxwell, the rules and responsibilities became more and more burdensome (including the threat of jail for negligent Trustees).

What this has led to is the responsibility for Pensions moving from the Trustees and Employer to the Employee and I'm not sure the Employee has realised this! Trustees used to (and still do where they exist) make sure occupational schemes were funded correctly to deliver on their pension promise. Who's doing that now?

The Employee should be but let's be honest that's just not going to happen – unless that is you think you can change a culture overnight!

So what's the alternative?

Well the modern day workplace pension schemes are in fact a collection of individual Employee pension savings accounts into which the Employer and Employee and HMRC (via tax relief) contribute. This savings account will accumulate a sum of money that will be used to provide a pension at the Employee's selected retirement age.

The control and ownership of this 'pot' lies absolutely with the Employee. So how can the Employer help the Employee ensure that they will have saved enough come their retirement day?

More than they may realise.

1. Education/ Advice

Helping the Employee understand the responsibility that they have for their pension and how much they need to save to achieve their retirement income objective.

Helping the Employee at retirement make the right choices of Pension Annuity (income). The amount of pension that an Employee could get varies hugely from provider to provider and on the thorough disclosure of their health. Perversely being in 'not perfect health' could result in a bigger pension.

2. Contribution

Pensions are expensive and are getting more so as we live for longer. The amount therefore that needs to be saved is likely to be beyond the means of most people. Therefore a healthy Employer's contribution is vital in helping bridge this gap.

3. Scheme charges

Employers are better placed to negotiate the best Annual Management Charge (AMC) on behalf of their Employees

4. Scheme Performance

A good scheme should produce a governance report which will outline and detail things like, number of members, leavers, joiners, fund mix and performance, age demographics and more besides. By holding the scheme advisers to account, Employers can ensure that the scheme is achieving its objectives and such information can aid point 1 above.

So I think a middle way is emerging whereby the Employer takes a more active role in the Education and performance of their 'New Workplace Pension Scheme'.

At some point in the history of pensions, the Employer/ Trustee have done it all and at some point the Employee has carried the entire burden.

The most effective way, as with most things, lies somewhere in the middle.