United Kingdom

Employers need to think again about how they support members at retirement

27 March 2019

At a glance

  • While employers state that financial education is important to them, the methods they are using to communicate and engage on pensions and other aspects of financial education are outdated and not efficient
  • 48% of employers were unaware of how they manage retirements from their Defined Contribution (DC) pension scheme, potentially leaving many employees reaching retirement without the opportunity to explore and establish what might be best for them
  • Group Personal Pension Plans (GPPs) remain the most popular form of DC pension scheme
  • Cost continues to be the factor most likely to lead schemes to consider changing pension provider

Support at retirement

The 2019 Aon Benefits & Trends survey shows that despite companies’ willingness to help their employees make the right decisions when it comes to retirement, the tools and processes they utilise are not currently meeting these needs.

Financial education and engagement

62.5% of respondents consider employee financial wellbeing to be the responsibility of the employer. Surprisingly, however, email (78%) is still the mechanism organisations use most to educate and engage employees on pension and financial related matters, closely followed by printed communications (63%).

Martin Parish, area director at Aon, said:
“Employers understand the need for employee financial education, yet they are not backing this up with the right methods. We were surprised to see that email and print continue to form the backbone of communications on financial matters when our research over the past couple of years has shown that employees are more than ever seeking face-to-face interaction.”

Support at retirement and financial wellbeing

Employees now have increased flexibility and choices at retirement. However, 48% of employers are not aware of what services or help they offer their members.

Martin Parish said:
“Firms are keen to do more but they tend to stick to what they know - which doesn’t necessarily address employees’ needs. Pensions Freedoms have been a welcome innovation for many employees, but with greater choice and freedom come greater complexity and responsibility. However, at retirement, members often lack the relevant information to allow them to make the right decision – to retire or stay in work for longer.

“These concerns were also highlighted in the FCA’s ‘2018 Retirement Outcomes Report’. To start addressing them, it’s important that employers recognise the need to align their communications and the help they offer with what people actually need when they retire. From what we’ve seen, this is usually some kind of face-to-face interaction.”

Martin Parish continued:
“If financial wellbeing is indeed a key concern, employers have to find better ways to help DC members, not only at retirement but throughout the accumulation phase. They also need to adapt that support to the different generations in their plan. Most importantly, they need to help employees understand how much income they will receive in retirement; for example, what a simple increase in contributions would mean for them.

“Selecting the right tools and methods – face-to-face for those reaching retirement now, or modelling technology for others who are currently building pension pots – will be the key to successful engagement around financial wellbeing.”

GPPs remain popular, while cost drives pension provider reviews

The number of businesses using GPPs rose over the year, confirming that contract-based pension arrangements continue to be a mainstream offering for UK businesses.

Martin Parish said:
“Interestingly, whether a company opts for a contract or a trust-based arrangement, can be defined by the history of the employer and the type(s) of pension scheme they have operated in the past.

“Major listed companies and those with some form of still-running DB schemes seem more comfortable sticking to a trust-based environment while businesses which have followed an approach with an eye on risk mitigation and reduced involvement, appear keener to offload liabilities and workload to contract-based plans.”

As with the 2018 survey results, cost remains the factor most likely to lead schemes to consider changing pension provider.

Martin Parish continued:
“When looking at the factors that drive schemes to change their provider, cost remains on top. However, it must be taken into consideration alongside other parameters such as performance of the default fund or adequate support for employees, not forgetting administration efficiencies for the employer.”

For more information download the 2019 Benefits and Trends Survey or to discuss any of the issues outlined in this article, please get in touch by emailing us at [email protected] or calling us on 0344 573 0033.


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