Two-thirds (65%) of those running pension schemes do not know how much a typical member can expect at retirement, according to Aon’s latest research.
The global professional services firm drew insights from 214 UK defined contribution (DC) schemes, with combined assets of over £60 billion and more than one million members, for its Five steps to better workplace pensions 2024 - dc pension scheme survey.
Only around one in three (35%) respondents know what sort of pension outcome a typical member of their DC scheme can expect. Of those that do know, 22% consider DC member outcomes based on the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards.
Nearly half (47%) have considered a change to their DC structure, while 70% monitor investment fund performance against benchmarks and 29% monitor what this means in aggregate for a member invested in a default arrangement. Two-fifths (41%) of schemes assess all their investment options against environmental, social and governance criteria.
The most popular approach for pensions is to offer a benefit in line with competitors, at 42%, while 36% offer a pension designed to deliver sufficient funds to enable employees to retire at a reasonable age. Around a quarter of employers currently using other structures expect to be in a master trust in five years’ time.
Three-quarters of schemes provide wider financial wellbeing support in addition to pensions, or plan to provide this in the next two years, with 35% having a preferred financial adviser firm to support members at retirement and 15% planning to do so.
Less than 10% of DC scheme members have selected their own target retirement age, although 40% do not measure this. Over six in 10 schemes have a drawdown option for members, but 25% still have no plans to offer one.
Steven Leigh, associate partner at Aon, said: “Given the importance that making appropriate decisions can have on DC savers’ eventual outcomes, it is encouraging to see that 42% of schemes are prioritising specific communication or engagement objectives. At the same time, and considering the potential impact of investment returns, we would perhaps expect 32% of schemes to focus on this. It is also surprising given they are such a key determinant of pension outcomes, to see that just 17% are prioritising increasing member contributions.
“A focus on financial education, including pensions, as part of a financial wellbeing programme continues to gain pace and is now starting to become a core tenet of an overall wellbeing strategy. Supporting DC savers with their wider finances is key to improving their engagement in a pension scheme. This not only means they can plan holistically for their retirement but also gives them a better chance of saving for the long-term once their immediate financial priorities are met.”
