3 Practical retirement management problems and solutions for HR managers

Pension management is an important issue for HR managers. Not only because it provides employees with financial security, but also for attracting and retaining talent. Many HR managers run into a number of practical problems related to pension management. In this blog, we discuss the main challenges and offer practical solutions for future-proof pension management.

1. Pension as an attractive and flexible condition of employment

In a tight labor market, retirement is a strategic tool to attract and retain talent. Employees have varying expectations depending on their age, financial situation and personal goals. Employers must therefore ensure that they offer a retirement plan that is both attractive and flexible.

Many traditional pension plans offer little room for customization, while employees increasingly need more control and freedom of choice. Creating a future-proof and flexible pension policy is therefore a major challenge for HR managers.

How do you give your employees the flexibility they expect? And furthermore, how do you make sure they truly value retirement, since it is often something that younger employees see as a "far cry." These are questions HR managers face.

2. Cost containment for employers

Managing pension plan costs is a challenging issue for employers. Collective plans can weigh heavily on an organization's financial resources, while flexible third-pillar solutions offer more customization. Also, determining a fair and viable employer contribution rate without impacting business results remains a delicate balancing act. HR managers must strike a balance between offering attractive retirement benefits and monitoring the financial strength of the organization. Whether with group retirement plans or individual third-pillar options, understanding costs and smart choices are essential.

A common question, then, is "how do I calculate the right deposit for retirement?" It depends on your chosen retirement plan and your organization's financial strength:

• Collective plans: Usually employers contribute 60%-70% of the total premium. This percentage is often determined by collective bargaining agreements or pension funds. But if there is none, you are basically free to choose as an employer. Nevertheless, the standard is then maintained. 
• Flexible arrangements (third pillar): You can fill this in any way that makes sense to you as an employer. Contribute a fixed amount per employee, contribute nothing, or apply percent matching. For example: you match 50% of the employee's own contribution, up to a maximum of €1,000 per year.

Practical example: For an employee with a pensionable salary of €40,000 and a contribution rate of 20%, where the employer contributes 60% of the contribution, the calculation is:
Employer contribution = €40,000 × 0.20 × 0.60 = €4,800 per year.

By using a clear calculation, you can make contributions predictable and manageable for your organization.

Another question we also often hear is, "Can I adjust the deposit later based on what happens within my organization?" And to that we say resoundingly, yes. At least, within a third pillar pension, the contribution from the employer is optional. So if things get a little worse, or better, you can simply adjust the contribution. But you do have to explain this adjustment to your employees. 

Unfortunately, such adjustments cannot be made within a group plan, or at least, they can be difficult. An employer wishing to make changes to a pension agreement must have employee approval to do so. An employer is only allowed to unilaterally adjust the pension plan in exceptional situations, in case of a significant interest in the proposed change. So this is less flexible and if as a startup or scale-up you don't have the capacity to do this, then it becomes difficult, because pensions have to be paid on.

3. Administration

Managing pension plans often involves a considerable administrative burden. HR managers must not only calculate premiums and coordinate with pension funds or insurers, but also ensure clear communication to employees. With group pension plans (second pillar), employers are often responsible for paying premiums and managing the administration. With third-pillar solutions, this burden lies more with the employee, but HR remains involved in informing and guiding employees. This requires a good balance between efficiency and clarity.

When managing pension plans, it is not only important for employers to understand their contributions, but also for employees to know how they themselves can actively contribute to their retirement. This often begs the question: how does an employee calculate their own contribution?

Employees can calculate their own contribution by following the following steps:

1. Check your pensionable salary: This is your gross salary minus the state pension franchise.
2. Calculate your contribution: Determine a percentage or fixed amount you want to contribute, depending on your financial ability. Also, never put in more than you can afford to lose. Therefore, it is helpful to start small and build up. 
3. Consider matching: See what your employer contributes. With percent matching, you benefit from additional pension accrual on top of your own contribution.

Practical example: An employee with a pensionable salary of €40,000, who then contributes 20% of the salary himself, ends up putting €4,000 into the pension pot. With an employer matching of 50%, the employer adds another €2,000 (if it does not specify a limit). Own contribution = €40,000 × 0.20 = €4,000 per year, and gets €2,000 extra from the employer.

Making these calculations transparent encourages employees to actively contribute to their retirement savings. Remember, of course, that your contributions come out of your net pay now - and you get the taxes back later, in the summer. 

Of course, as an HR manager, you have long been aware of these problems. But how can you solve them now? Read on quickly to find out.

How do you solve these problems as an HR manager?

Addressing the challenges surrounding pension management requires a strategic approach. Here are targeted solutions that address the three main issues: attractive benefits, cost control and administrative burden.

1. Make retirement attractive and flexible

Employees expect more control and choice in their pension plans. By making retirement attractive, you not only strengthen employee confidence but also improve your employer image.

• Personalize retirement plans: Let employees choose between fixed or variable benefits and offer flexibility in contribution options so that the plan fits different life stages.
• Encourage participation: Consider percent matching or flat rate contributions. For example, match employees' contributions up to a certain maximum. This shows that as an employer you are investing in their future.
• Communicate clearly: During onboarding and evaluations, inform employees about the benefits of retirement plans and how they contribute to their financial security.

2. Manage costs effectively

Cost control is all about transparency and smart choices, so that as an employer you strike a balance between attractive retirement options and financial sustainability.

• Set clear limits: Define a fixed percentage or maximum for employer contributions to ensure predictability.
• Take advantage of tax benefits: Take advantage of deductibility of premiums and other arrangements to reduce net costs.
• Employer flexibility: Opt for a third-pillar solution that allows room to adjust contributions, such as with a temporary pension freeze in economically challenging times.

3. Ease administrative burdens

Efficiency in administration not only saves time but also prevents errors and misunderstandings that can damage confidence in pension administration.

• Automate processes: Use digital tools such as retirement portals that allow employees to view and manage their accrual themselves.
• Share the responsibility: Encourage employees to actively manage their retirement and offer training on online tools.
• Work with experts: Outside consultants or administrative partners can simplify complex arrangements and ease the process.

Why this works

With a strategic approach, as an HR manager you can turn practical problems into opportunities. By offering customization, smart cost control and efficient administration, you strengthen employee trust and involvement. At the same time, you lay the foundation for a future-proof and effective pension policy.

From complex problems to effective solutions for HR

Pension management is a complex part of HR management. It not only provides financial security for employees, but also plays a key role in attracting and retaining talent. As discussed in this blog, HR managers face challenges of attractive benefits, cost control and administrative efficiency.

By focusing on customization, smart cost strategies and streamlined processes, these challenges can be turned into opportunities. Implementing flexible retirement options, leveraging digital tools and engaging external experts not only helps ease workloads, but also boosts employee confidence and satisfaction.

A future-proof retirement policy shows that organizations are not only mindful of today's needs, but also the financial future of their employees. HR managers play a central role in this, and with the right approach, they can contribute to a strong employer brand and a sustainable business.

Invest in a strategic retirement policy that fits the needs of your employees and organization. The right choices today lay the foundation for a stable and successful future.