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Businesses must
work harder to disprove unfair negative views about defined contribution
(DC) pension schemes, warned the Confederation of British Industry
(CBI) and Mercer.
The two firms have joined forces to highlight the importance of
rebutting these views in a new report, Saving For Tomorrow. They
say many staff are put off from saving for retirement by the relatively
poor perception of DC pensions, despite most of these schemes offering
higher pension contributions than the 2012 Personal Accounts scheme.
The report found that many firms which engaged and supported staff
and gave clear signals about pensions benefited from increased take-up
and higher satisfaction levels. A separate CBI survey showed that
69 per cent of senior executives feel that employees do not properly
value their DC scheme, despite a clear upward trend in contributions.
Data from the Office of National Statistics shows that the number
of private sector workers saving into occupational retirement plans
fell by 400,000 last year to 3.6million.
Richard Lambert, director-general at CBI, commented: “Too
many employees are not saving for their pension, even though there
is often an excellent employer scheme open to them. Sometimes this
is due to a lack of understanding of the benefit on offer, but often
it can be explained by the negative view of defined contribution
that has prevailed in recent years.”
Tony Pugh, UK head of defined contribution pension services at Mercer,
added: “There has been a significant increase of employers
reviewing their DC plan strategy over the last 18 months. Many DC
plans were initially set up as a hasty response to defined benefit
plan funding issues – some didn’t give full consideration
to employers’ DC objectives, good governance or wider employee
requirements, for example.
“We expect the trend in improvements to continue as employers
continue to review how to get best value from their DC offering
and remain competitive with other employers who have already made
changes to their plans.”
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Pensions Age July 2008
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