By Charles Cotton, CIPD senior adviser for Reward and Performance.I was fortunate enough to attend one of the 2020 Pensions and Lifetime Savings Association’s conferences a couple of weeks ago. This event, which was held in Edinburgh, focused on investments in terms of where money should be put to try and help employees have enough cash to live on when they come to retire from paid work.The audience of the event was varied from trustees trying to ensure pension commitments are met, employers endeavouring to get value for money from their pension spend, to investment providers, advisers and administrators sharing their professional insights and pitching for business. Issues for both defined benefit pensions (DB) and defined contribution (DC) pension arrangements were explored.The big theme at the event was the environment and ensuring that the money invested for the benefit of people did not contribute to a worsening climate. As was pointed out, there was not much point encouraging people to save for the long-term if there wasn’t going to be a long-term. Especially apt I thought given the economic and environmental impact of the recent floods in some parts of the UK and the fires in Australia.There was a concern that some investors and pension schemes would pay lip service to green issues, but the pension minister took to the stage to warn them against adopting such an approach. Others pointed out that many people who are members of a pension scheme wanted to see their funds invested in ways that either make a positive difference for the environment and communities or at the very least don’t do them damage, so it made sense for schemes to respond to this. Also, if a business was pursuing a set of ethical objectives it would look odd if this was not also reflected in its own workplace pension plan.From an HR perspective, it’s important that pension decisions and options reflect growing environmental as well as social and governance (ESG) concerns. For instance, when it comes to a DC plan, are there ethical options in which to invest? There’s also a role for HR to communicate and let people know about the investment opportunities available and the potential consequences arising from their decisions.Of course, whether employees get to enjoy their retirement won’t just depend on the environment but also on how much their fund is worth when they come to leave work. While automatic enrolment was lauded as a great success at the conference, the pensions minister shied away from calls to increase the minimum legal pension contribution from employees (5%, or 4% after tax) and employers (3%) to ensure enough was going in to ensure a decent outcome.He claimed that the current economic outlook was uncertain, and the government didn’t want to increase payroll costs for organisations, which I found odd as it had been more than happy to increase minimum wage rates over the past few years. Given that by the time he had finished his speech, stock markets across the world were collapsing he came across as very prescient.There’s a role for HR to communicate to employees about what the stock market is doing to their pensions and what they should consider before acting. Some DC scheme members, especially younger ones, will not have experienced something like this before, so reassurance is important. It might even be an opportunity to encourage them to increase their contributions if they can to take advantage of the current low share prices.In the case of DB pensions, HR needs to be involved in discussion about how the employer finds the extra money that the scheme may now need to reduce the deficit. It will be interesting to see the approach adopted by the Pension Regulator to deficit reductions during this period of economic turbulence.Of course, the conference met against the backdrop of the Coronavirus. At the start of the event I was wondering whether there would be enough hand sanitiser or toilet paper at the EICC. Halfway through, I was asking myself whether I would have to carry on working for another few years to restore the value of my pension fund, and by the time I left I was thinking what the impact on the workforce and the workplace would be of an impending recession.How deep and long any economic downturn will be depends on the actions of several players, including employers. At the conference, one speaker said that how an organisation treated its employees in response to this crisis would give an insight into its true values, purpose, mission and culture. HR has an important role in ensuring that their organisations stay true to their vision and not rush to make short-term knee jerk responses without thinking through the potential consequences and alternatives. If they don’t, then they will be viewed harshly by their workers, investors and customers.
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