Monday, 07 July 2014 09:38
80% of employers 'sleepwalking' into outdated company pension
As many as eight in ten employers are "sleepwalking towards an outdated company pension", according to research by Hargreaves Lansdown.
Just 20% of employers intend to make changes to their company pension scheme as a result of the recent Budget and DWP reforms, Hargreaves Lansdown's June employer survey revealed.
Laith Khalaf, head of corporate research at Hargreaves Lansdown, said: "The recent pension reforms mark a profound shift in the pensions landscape and should prompt a review of default strategies, retirement communications and the cost of advisory services.
"Almost every company pension scheme in the land will have to make some changes to accommodate these new rules.
"However, at present, most employers appear to be seriously under-estimating the practical impact of these reforms.
"The danger is they are sleepwalking into offering a company pension scheme which is no longer fit for purpose."
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Other key headlines from the survey results were:
• 60% of employers think more employee engagement in savings decisions would make the UK pension system better.
• Only 15% think that Collective Defined Contribution schemes will improve the UK pension system.
• One third of employers support increasing the minimum employer contributions to auto-enrolment schemes.
Hargreaves Lansdown recommended employers look at five major areas in the light of changes to pensions.
The company said it was important for businesses to communicate to staff the key messages about flexibility as the pension system changes next April, including helping them with financial education.
It also warned a traditional lifestyling strategy, designed for employees who buy an annuity, will therefore be inappropriate for the majority of the workforce, and needs to be reviewed by next April at the latest. Currently 90% take this up but it is expected to fall to 25% next April.
Schemes above the 0.75% charge cap will need to be reviewed by April 2015 at the latest, it warned, while those with an Active Member Discount will also need to make changes by April 2016 at the latest, as they will be banned from that date.
Employers need to review the quality and cost of advisory services to make sure they are getting value for money, the firm added.
Just 20% of employers intend to make changes to their company pension scheme as a result of the recent Budget and DWP reforms, Hargreaves Lansdown's June employer survey revealed.
Laith Khalaf, head of corporate research at Hargreaves Lansdown, said: "The recent pension reforms mark a profound shift in the pensions landscape and should prompt a review of default strategies, retirement communications and the cost of advisory services.
"Almost every company pension scheme in the land will have to make some changes to accommodate these new rules.
"However, at present, most employers appear to be seriously under-estimating the practical impact of these reforms.
"The danger is they are sleepwalking into offering a company pension scheme which is no longer fit for purpose."
{desktop}{/desktop}{mobile}{/mobile}
Other key headlines from the survey results were:
• 60% of employers think more employee engagement in savings decisions would make the UK pension system better.
• Only 15% think that Collective Defined Contribution schemes will improve the UK pension system.
• One third of employers support increasing the minimum employer contributions to auto-enrolment schemes.
Hargreaves Lansdown recommended employers look at five major areas in the light of changes to pensions.
The company said it was important for businesses to communicate to staff the key messages about flexibility as the pension system changes next April, including helping them with financial education.
It also warned a traditional lifestyling strategy, designed for employees who buy an annuity, will therefore be inappropriate for the majority of the workforce, and needs to be reviewed by next April at the latest. Currently 90% take this up but it is expected to fall to 25% next April.
Schemes above the 0.75% charge cap will need to be reviewed by April 2015 at the latest, it warned, while those with an Active Member Discount will also need to make changes by April 2016 at the latest, as they will be banned from that date.
Employers need to review the quality and cost of advisory services to make sure they are getting value for money, the firm added.
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