HR may hold the key to solving pensions crisis

The Pensions Commission's interim report on the extent of the pensions crisis concluded that "we must make adjustments to public policy and individual behaviour which ideally should have been started in the last 20 to 30 years".

While the report paints a grim picture of billions of pounds of financial deficits and the prospect of people working until they drop, the crisis provides a chance for HR departments to shine, experts say.

As companies struggle to convince staff to invest in occupational pensions, while fighting the battle to be an employer of choice in a dwindling talent pool, HR's approach to pensions could make all the difference, said Andrew Cheseldine, senior pensions consultant at Watson Wyatt.

Cheseldine believes communication is key in persuading people to save for retirement, while also making pensions a valuable tool for recruitment and retention.

"If employers really want more people to join their scheme and have recognition for what they are spending, they have to make people aware of what they are getting," he said. "With the present uncertainty and as pension schemes change, HR will become more important as the facilitator of change and it will also be able to take all the kudos."

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), said people were not saving enough because they didn't see the need to join schemes. "HR's role is to explain the benefits of occupational pensions and get across to people that they should see it as an attractive saving vehicle," he said.

"It can be too confusing and complex - HR needs to ask how it can make it as simple as possible."

Greater understanding would give staff and prospective employees a better appreciation of the value of a package of benefits, Cotton said. "Communication is not just an extra cost but an investment - it will have an impact on people's decision to move," he added.

A proven way to get staff involved in occupational pensions from the start is through automatic entry, whereby staff are given the option to opt out rather than opt in.

This stops short of compulsion, which the CBI is railing against but which the TUC advocates, calling for a national debate on introducing further compulsion into the UK's pensions system.

Research from Watson Wyatt found a 95 per cent take-up rate when automatic entry is offered, compared to a 59 per cent take-up rate when it was made optional.

Cotton said companies can use apathy about pensions to their advantage: "Give staff [an unwieldy amount of] pensions documents that give them the option of getting out," he said.

Cheseldine said companies should not only make entry automatic, but also make increases in staff contributions automatic when they got paid more using the same system.

A solution mooted by the Turner Commission report is making people work longer and ending a culture of early retirement. This will need a change in attitude for those companies who believe getting rid of people at 50 clears out dead wood in an organisation, according to David Coats, associate director for policy at The Work Foundation.

"Not only is this wrong, in most cases it is a policy at odds with the thrust of the Pensions Commission analysis," he said. "A policy of keeping people working won't work if employers insist on sticking to a sell-by date for their employees."

Encouraging people to work longer is not just an age issue, said David Yeandle, deputy director of employment policy at manufacturers' organisation EEF.

Yeandle said employers had to come up with imaginative ways of getting people who are signed off with long-term sickness back to work. "Try bringing them back part time or on lighter duties and keep in touch while they are off."