The number of UK companies offering employees flexibility in how they use pension contributions will triple over the next two years, according to Willis Towers Watson (WTW).
The consulting giant’s 2018 UK Pension Strategy Survey found that, while just 9% of organisations currently allowed all employees to use their pension contributions for other financial priorities, three in 10 (29%) said they would do so within the next two years.
Among organisations with over 5,000 employees, 38% expected to offer greater flexibility in the next two years, up from 6% that currently offered the option.
A third (32%) of medium-sized companies – 1,000 to 4,999 employees – said they would introduce flexibilities, with 11% currently offering them. Companies with fewer than 1,000 employees planning more flexibility are set to double in number, from 8% to 19%.
However, controlling the cost of pension provision remained a significant challenge for employers, WTW reported, with 40% of companies saying they needed to maintain the current level of spend on benefits or retirement provision.
More than a third (37%) of employers with open defined benefit (DB) plans have taken steps to control costs, WTW found, mainly by increasing member contribution rates. Union pressures, legal restrictions and increased complexity were the main barriers to changes in DB plan design.
Top priorities for respondents over the short-term included adding to existing financial wellbeing programmes (33% of organisations) and increasing the range of choice offered to employees in relation to their wider benefits (31%).
Minh Tran, director of wealth and workplace savings at WTW, said: “While managing cost remains a key influence, organisations of all sizes are increasingly willing to embrace new ways of structuring and delivering benefits.”
Tran added: “Employers appear increasingly keen to view retirement saving less as a stand-alone issue, and more as an integral part of their employees’ wider financial planning and wellbeing, and are exploring new ways of delivering this support.”
In carrying out its survey, WTW questioned pension trustees and representatives of the pensions, benefits and HR teams from nearly 200 organisations in summer 2018.
Last week, UK defined contribution master trust the National Employment Savings Trust (NEST) launched the trial of a savings product to sit alongside its auto-enrolment pension fund service.
Shoe repair chain Timpson will pilot a scheme under which pension contributions above the auto-enrolment minimum will be diverted into an ‘emergency’ cash account. This account will be capped at £1,000 of savings; once reached, all contributions will go to the pension fund.
Savers will be able to withdraw savings, and are expected to use the account to fund financial emergencies.