Amanda Wilkinson: editor of Employee Benefits: Pensions is the one benefit that employers are constantly having to review, either out of economic or legislative necessity.
The perk may not be a direct responsibility, but all benefits and compensation experts should keep abreast of the options facing their organisation as they may end up communicating a pensions restructure to staff or integrating it into the overall benefits strategy. This will become even more of a priority as employers review their options in the light of personal accounts, due to come into effect in 2012.
Independently of personal accounts, most employers with defined benefit (DB) pensions will already have had to take radical steps to deal with significant deficits. A large number have chosen to close their DB schemes and switch to the less-financially exposed territory of defined contribution (DC) schemes. However, a few have decided to do what they can to retain their DB scheme even if it is just for existing members. This is admirable, and should at least help with employee retention, if not recruitment.
Those employers that have given up on DB and switched to a trust-based scheme may again be reviewing their options because of the increasing regulatory burden placed on trustees by The Pensions Regulator. For them, contract-based DC schemes may offer a more attractive option that is lighter on administration and the pocket.
But those looking for the least involvement possible could be disappointed. The Regulator has just published guidance on how employers can become more involved in the governance of contract-based DC schemes. This is not compulsory, however. While the more enlightened employers will follow best practice and take on board the Regulator’s suggestions, others will not be so keen.
However, employers that want to do well by their employees should take steps to follow the guidance and put in place financial education programmes to help support their staff in their investment decisions, benchmark providers’ charges and monitor the make-up of default funds. Those employers that make the effort and demonstrate they care for employees’ financial wellbeing will end up offering a point of difference from those that simply wash their hands of all responsibility.
Amanda Wilkinson, Editor