Employers unprepared for pension reforms

Nearly a quarter (23%) of UK businesses have not considered the implications of auto-enrolment on their pension schemes, according to the Aon Consulting Employee Benefits and Trends Report 2010 by Aon Hewitt.

The findings from the report coincide with the latest figures from Aon Hewitt’s monthly DC Index which found that a 30 year old has seen their projected retirement income drop by over £1,000 in the past month.

A 60 and 65 year old will also have seen a minor dent in their pensions as income decreased by £86 and £65 respectively as a result of poor stock market performance.

Richard Strachan, senior consultant at Aon Hewitt, said: “Preparing for auto-enrolment is about medium-term financial planning.

“From January 2013, the FSA will start to implement changes as a result of its Retail Distribution Review.

“These changes will potentially reduce the availability of advice for employers and employees – advice which is badly needed to ensure the success of this financial planning.

“Employers therefore need to consider how the new auto-enrolment regime will affect them and to ensure that their arrangements are fit for purpose. This action needs to be taken well in advance of when they are due to move into the new regime.

“Furthermore, since the index this month reveals continued volatility in the nation’s pension savings, this unpredictable position means that employees require both guidance and reassurance from their employers.

“Companies therefore need to ensure they are ahead of the game in their planning and in availability of advice for their workforce, both for current pension arrangements and for the introduction of auto-enrolment.”

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