The introduction of new minimum contribution rates could boost the value of Employee Benefits according to research from MetLife UK
Research from MetLife UK found that 85% of Employee Benefit Consultants (EBCs) believe that auto-enrolment has delivered a step change in funding for wider benefits. As a result, EBCs admit they need to enhance their offer to clients ahead of the launch of higher employee and employer minimum contributions from April 2018.
Having recently celebrated its 5th anniversary, auto-enrolment has seen 8.5 million employees start saving for their retirement and 800,000 employers sign up. Employer contributions are set to increase from 1% of salary to 2% while employee contributions rise from 1% to 3%.
There is still concern surrounding potential drop-outs once the change is made as 27% of EBCs believe that employees will opt-out of pension savings because of the increase in their contributions.
However, four out of five (78%) EBCs believe the rise in auto-enrolment minimum contributions will not lead to cuts in benefit budgets and 34% believe employers will even increase their benefit budgets.
Optimistic industry predictions that the launch of auto-enrolment would expand the Group Risk market with more employers signing up have been unfounded as the experience has been that existing schemes have grown but the new employer market did not.
Adrian Matthews, Employee Benefits Director, MetLife UK said: “The increase in minimum contributions for employers and employees next April is a potential challenge for employee benefits providers and consultants and needs to be addressed.
“It is encouraging that EBCs do not believe it will mean a major drop off in employee contributions, but providers and consultants need to focus on ensuring the value of benefits is widely understood.
“The evidence is that employees are increasingly valuing the benefits they receive at work which creates a real opportunity for businesses to align their benefits strategy with their business strategy.”
Around one in three (33%) of consultants believe Group Risk providers need to review the products they offer clients as a result of the rise in contributions while 73% of consultants say they are concerned about the rising cost of benefits provision for employers in the future. Which is why EBCs and providers need to enhance their offer to clients to expand business with large corporates as well as SMEs.