How has the jobs market evolved over the past couple of years?
There is a shortage of skills across many industries and the ‘war for talent’ that analysts have spoken about in recent years is really coming to the fore. Some economists are referring to the current time as the ‘Great Resignation’, as the number of people looking to change jobs is higher than ever.
A global survey by Microsoft discovered that 41% of workers are considering quitting their job, rising to more than half of those aged 18 to 25, while a UK study by Persenio found 38% of workers plan to quit within the next year. A lot of this is pent up demand after people took a wait-and-see approach during the Covid crisis, but the pandemic has also changed what people expect from their employer.
How is this affecting companies’ employee value proposition?
The employee value proposition is changing considerably, as employers look to adapt to a changing mindset among workers. The pandemic has shown that employees can work productively remotely and this has opened people’s eyes to the big wide world. I was recently asked by an employee if they could move to Crete and work from there. My daughter works for a business in Kent but lives in Glasgow.
The flexibility of remote working was previously seen as a perk, but for many this is now offered as standard. This means employers need to be able to differentiate in alternative ways. Work-life balance is now more important than salary for two-thirds of UK workers, a recent Randstad study found. Salaries are almost becoming neutralised, with staff increasingly asking, ‘What else am I getting?’ Beyond salary and bonus, pensions are the most valuable benefit you can get from an employer.
Do pensions really matter to younger workers when they are choosing a job?
They do to an extent, but if we switch ‘do’ with ‘should’ in that question, then the answer is ‘yes, they absolutely should’. The challenge is that a lot of people don’t really understand pensions, despite millions of new savers joining pension schemes since the introduction of automatic enrolment. There is still a big education gap that we as an industry, and employers, need to fix.
When I started working 30 years ago, pensions were based on a different system. Nobody really paid attention to them, because you just got a proportion of your salary when you retired. It’s now a very different, savings-based system that requires more engagement at a younger age to get a better return. Unfortunately, the pensions inertia from prior generations has lived on. We need to find ways to change that because pensions can be a fantastic tool to attract and retain talent. They are a key part of the employee value proposition because it’s not just about rewarding people today but also looking after them further on in their life.
What is it going to take to get people more engaged in their pensions?
We need a time machine transporting younger workers forward to their 50s and beyond, so they can understand what kind of life they will want to live then and, more importantly, how they will be able to afford it.
Many of our desires remain very similar, such as travel, wanting a nice place to live and a nice car, but there are different priorities too. You might be putting your kids through university or trying to pay your mortgage off. What income will you require to do all of that and live a comfortable life, and are you saving enough into your pension now to enable that? The answer, in most cases, is no.
A time machine would help young workers understand that. And while it might sound like science fiction, there are technology tools we are developing now to provide that kind of experience. We need to virtually take people to different points in their life and show them how it feels.
How is Capita supporting trustees and companies in this area?
As well as developing online functionality, which will help to create the time machine concept to support better retirement planning and decision making, we also support employers by managing their auto-enrolments and through communication. We work with trustees and employers to put together communication plans to educate and raise awareness.
We also have a data remediation business, which is key. As pensions are a long-term savings pot, it’s a challenge to keep pensions data fully accurate over an individual’s working life. This is unlike banking data, for example, because people realise very quickly if something in their bank account isn’t right. We work with employers and pension trustees to show them what good data looks like, the quality of the data that they have got and what action they need to take to get it to the right place.
How do you see the pensions landscape evolving in the coming years, particularly as it collides with the war for talent?
A pensions dashboard will launch from 2023 providing individuals with much more information about what they have. If you’ve had lots of different jobs, which is increasingly likely in the gig economy, you will finally be able to see everything in one place. The key will be helping people to make decisions based on that aggregated information.
A big question we will need to answer as an industry is whether pension pots will start to follow individuals rather than being driven by employers, as is being introduced in Australia. This ownership will see pensions become an even bigger part of employment conversation. Your question to your new employer becomes, ‘How much are you going to pay into my pension pot?’.
Alongside the education time machine, people will know what they need to put into the pension pot to get to where they want to be when they are 50, 60, 70 years old and beyond. The working world is very different now and we must all evolve to embrace not only technology but a more flexible pension system.
For more information, visit content.capita.com/pensions