A new look at workplace pensions and shares
25 March 2015
By: John Harding
Reward packages at work are frequently a one-size fits all, with employers’ packages including a range of benefits depending on position and pay-scale. But new research by PwC suggests that businesses could benefit by tailoring their reward programmes according to employee preference.
In a survey of more than 2,4oo UK employees, respondents were asked firstly to choose the employee benefits they valued most or would like to see introduced, secondly how they would spend a discretionary lump sum bonus, and finally, if they would consider giving up a small percentage of their salary for an extra reward such as a company car.
Surprisingly, the most popular benefits among employees are long-term savings vehicles, with pensions and shares most highly prized, suggesting that people recognise the need to save for the long-term rather than spend their earnings on immediate consumption. 65% of respondents opted for contributions to their pension pots, while around one half of respondents (49%) said they would participate in a company share scheme. Company cars and medical insurance were chosen by over a quarter of those surveyed (28%).
Given new pension flexibilities introduced from April, tax efficient savings such as pensions and share plans look to be back in vogue. Interestingly, however, while many would use a one off windfall to fund savings plans, surprisingly few would give up current salary for them. Communicating workplace benefits effectively is one important conclusion of the findings, as well as allowing employees the opportunity to use bonuses, variable pay elements and pay awards towards their benefits package rather than simply giving up existing pay under Flexible Benefit schemes.
We also found that the extent to which each benefit is valued varies by gender, age, the region in which they live, and industry in which they work, with older employees placing greater value on pensions (70% of those 40+) than those in their 20s (56%). Pensions are deemed to be of far higher value within the public sector (73%) than within the manufacturing sector (57%), and they are also 5% more popular with men than with women. Share schemes followed the same trend.
Employees are clearly balancing short-term consumption with longer term financial planning. When offered a one-off £500 bonus, most chose pensions again, followed by extra holiday leave. But asked instead to give up 5% of their existing pay for a new workplace benefit, two-thirds said they would not, showing cash is still king overall.
The message from the survey overall is that if employers target their benefits spend according to employee demographics, they may save valuable resources by only offering benefits valued appropriately by segments of their workforce.