Law firms fear pension freedoms will create HR issues, survey revealsJune 16, 2015 Leave your thoughts
Nearly half of law firms plan to offer paid-for financial guidance to staff.
More than a quarter (27 per cent) of law firms are concerned that recently introduced pensions freedoms will cause HR problems, according to research.
A survey with 118 law firms, conducted by Portus Employee Benefits on behalf of the HR in Law consultancy, found that employers in the sector think the ability for people to cash in their pension rather than be required to spend it on an annuity – which provides a guaranteed regular income – could mean fewer staff will be able to afford to retire.
Since April 2015, employees have had the ability to cash in their pension pot when they reach 55 without facing large penalty charges.
However, law firms interviewed for the survey warned that now staff may not want to retire, or may not be able to afford to, because they have not saved enough or have spent their pension savings in the run-up to retirement.
Survey respondents raised concerns that this could make it difficult for employers to maintain a balanced age profile in their workforces, especially as they can no longer use the default retirement age, which was abolished in 2011.
According to the research almost half of law firms (45 per cent) surveyed are attempting to pre-empt any potential problems by offering paid-for pension and retirement advice, which rises to 56 per cent among US and global law firms. However communication around pension pot options and what they could mean in the longer-term remains an issue, the survey showed, with 32 per cent admitting that they have no plans to communicate with staff about the changes.
The study also confirmed a strong commitment among the sector’s employers to provide staff with benefits including private medical insurance (PMI), income protection and life assurance, as well as pensions.
Researchers said that law firms are ahead of legislative requirements on workplace auto-enrolment pensions as they generally offer contributions of 5 per cent on a matched basis. In addition, about 95 per cent offer life assurance to staff, while 75 per cent provide PMI to professional staff and 66 per cent to support staff. Similar levels of income protection cover are provided with 73 per cent offering it to professional staff and 65 per cent to support staff.
“The legal sector can take pride from being ahead of many other industries in pension provision. But the key – as with all employee benefits provision – will be communication to help staff understand retirement planning and benefits in general,” said Stuart Gray chairman of Portus Consulting.
“One potential growth area could be the launch of broader financial education and guidance services. But guidance will need to ensure it covers the specific needs of different groups of employees. What suits baby boomers is unlikely to engage generation X or Y.”
Rob Hind, HR in Law’s chairman and director, added: “We have experienced a period of unprecedented change in employee benefits in the last two years largely driven by legislation. Future group risk benefits should reflect the ageing UK workforce which is placing increased responsibility on employers.”