The U.K.’s Pensions Regulator is reaching out to trustees and employers in an effort to enable informed member choices at retirement and improve the quality of defined contribution (DC) plan sponsor engagement.
“Employer engagement is central to good DC provision, states The Pensions Regulator in its Engaged employers and informed retirement choices study. “Where employers take an active interest in the pension they offer they can encourage employee take-up and motivate employees to think about their retirement plans. By enabling employees to save for their retirement, employers can help to cultivate a committed workforce.”
The regulator acknowledges that some employers are anxious about engaging with their workforce on pensions, particularly when it comes to their liability in connection to giving information and support. An upcoming guide will be published later this year to help employers provide pension information and support to their employees.
“We encourage trustees, employers, providers and advisors to ensure that they have clearly defined responsibilities for the governance and management of occupational pension arrangements,” reads the statement. “This includes responsibility for regularly monitoring charges, reviewing scheme administration and investment options, producing effective member communications, and checking that the plan continues to meet the needs of their workforce.”
This is welcome news to Mercer, which released its own statement regarding the regulator’s efforts.
“Sponsors of contract-based DC plans have long faced the problem of how to engage effectively with their employees on pensions whilst being mindful of the restrictions on financial promotions introduced in the Financial Services & Markets Act 2000,” says Andy Parker, a principal in Mercer’s DC business. “Although a 2005 amendment to the act allowed sponsors to promote their contract-based plans to employees, this did not clarify how employers can govern their plans effectively; in particular, communicating to employees around investment options remains an area of concern for employers.”
Many employers have concerns over doing this, says Mercer, which means a large number of contract-based DC plans are running on autopilot. – The firm would like to see that the forthcoming guidance will give comfort to employers, which have easier access to investment advice than plan members, so that they can take responsible decisions without fear of taking on additional risk and liability.
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