Jacqueline Moore: What does the future hold for dependants’ pensions?

The dependant’s pension used to be part of our defined benefit (DB) scheme, and met the needs of our employees.

Moore Jacqueline-NHBC-2015

However, in recent years, as the traditional family and work models have become much more flexible, family finances have changed too, and we have closed the DB scheme in favour of a defined contribution (DC) plan.

Thirty years ago, if an employee died during active service, there may well have been a dependent wife who needed the pension to raise the children. 

Retiring after 40 years in the workplace, a pensioner would most likely have paid off the mortgage some years before, the children would be financially independent, and only his wife would be likely to need access to his income in retirement. 

So it made sense to offer a pension that would protect her after the employee’s potentially early death.

Today, people are less likely to die in service. When they reach traditional retirement age, they may choose to mix some earning with taking some pension. They may still be paying off a mortgage or have grown-up children at home. Partners may also have equal earning power, and both are likely to live longer than they did 20 years ago.

As an employer, we want to provide employees with a flexible long-term savings product and a reasonable level of life assurance. Not everyone wants a dependant’s pension, but they do want the freedom to choose the financial product that is right for them.

They certainly don’t want to think they have spent up to 40 years paying for a benefit they may never receive.

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Therefore, I think a dependant’s pension may have a future for some people, but it is a relatively expensive benefit and we need to educate employees to make the right choices for themselves.

Jacqueline Moore is head of HR at NHBC