Seven reasons for taking a critical look at your pension scheme

26 October 2021


As an employer, you want the best for your employees. That’s why you create the best possible employment terms. A pension is such a valuable employment benefit. If your pension scheme has been up and running for a while, it’s time to see if it still matches your company’s objectives.

1. You want your employees to have a comfortable retirement
A good pension scheme can strengthen the bond with your employees. The scheme increases their chances of continuing their desired lifestyle after retirement, which makes it a valuable part of the remuneration package. A good scheme also helps the organisation to attract new talent, especially if the pension scheme offers flexibility. Niels van Maurik, Product Manager at BeFrank: ‘Pension scheme flexibility is an important advantage in today’s tight labour market. It’s nice if you offer your employees a number of choices within the pension scheme. This way, employees can align their pension with their own wishes as well as possible. For instance, how much risk the employee finds acceptable and how sustainably the contribution is invested.

2. Pension costs the organisation a lot of time
Do you know how many hours your organisation spends each month arranging pensions for employees? Van Maurik advises organisations to keep track of how much time is spent on administrative activities related to pensions, such as processing personnel changes or answering questions from employees or former employees. Choose a pension administrator that allows you to process changes quickly and directly in the employer’s portal. It’s even more convenient if changes are processed automatically thanks to a link with the payroll system. Van Maurik: ‘Current and former employees can often find all the information about their accrued pension in the portal. At BeFrank, this information is also available in an app. An additional advantage is that HR receives fewer questions if the pension administrator communicates clearly.’

3. Affordability of the pension scheme can be improvedBusiness is becoming more and more competitive. As an employer, it’s logical to take a critical look at the costs, including those of your pension scheme. It’s not only the amount of the costs that counts, but also their predictability. In traditional pension schemes, the employee receives a promise of a pension in the future. Due to interest rates and the life expectancy of employees after retirement, increasing contributions are a risk that need to be kept in mind. You can mitigate this risk by choosing a pension scheme based on defined contribution (DC): a defined contribution scheme.

4. Current pension provision is fragmented
In your company, past acquisitions may have created a variety of different pension schemes, each in a separate legal entity. Bundling them in one new defined contribution scheme is an attractive option. This ensures an equal scheme for all employees. It’s also much simpler administratively, says Van Maurik. He emphasises that such a bundling process must be carefully prepared and implemented. ‘Take your time and involve everyone in the process from the start. Employees and works council representatives, but also management and shareholders. A pension advisor can play an important role in this.’

5. Pension awareness must be raised
The employer’s pension is a valuable supplement to the state pension, the basic government provision. As an employer, you want employees to build up enough pension for a comfortable retirement. A clear and straightforward pension scheme helps. ‘A state pension alone doesn’t pay the bills, says Van Maurik. It’s important for your employees to be aware of their pension. Only when you have insight into your own pension and understand it, can you influence it. For example, by adjusting your contributions or the investment risk. The extent of any pension gap also becomes clear. With this knowledge, the employee can start building up assets on time. The longer the horizon, the longer the assets have to grow. Van Maurik: ‘At BeFrank, we therefore do everything in our power to make people aware in good time of the possibilities related to their pensions. About 80% of the people with a pension at BeFrank have now logged in to BeFrank. Van Maurik: ‘What works well is our pension threshold that we put in our customers’ offices. We literally help people across the threshold and answer all their questions about pensions.’

6. Your company has sustainable ambitions
Sustainability is high on the agenda for an increasing number of employers and employees. It’s likely that many employees in your company also think it’s important for their pension contributions to be invested in a socially responsible way. Everyone wants to enjoy their retirement in a liveable world. If your organisation is also working on sustainability, take a look at the pension scheme, too. Van Maurik: ‘At BeFrank, the pension contribution is invested in a socially responsible way. As an employer, do you want to offer an even more sustainable alternative? This can be done, for example, by investing the pension contribution in Triodos funds. Employees can make their own choice in this regard. After all, it concerns their future.’

7. The pension agreement is coming
There are major pension changes in the pipeline. Changes are needed to modernise the pension system and keep it affordable. The pension will soon be fairer, but also more uncertain, for almost everyone. The exact impact of the pension agreement on employees depends on their age, among other things. Information about the possibilities and risks involved in accruing a pension will soon be more important than ever. The government places much of the responsibility for this on the employer. A good pension administrator, together with the pension advisor, can take a lot of work off the company’s hands.

This article appeared on on 25 October 2021.