Almost two thirds of defined contribution pension schemes offer members flexibility with three or more investment and lifestyle strategies, new research has found.
Lane Clark and Peacock’s (LCP) report How are DC schemes adapting to freedom and choice? published today, 5 December, found that although 60 per cent offer flexibility, employers “need to be mindful” of overwhelming savers by “offering too much choice”.
Additionally, the survey found that 39 per cent of schemes do not offer pre-retirement communication to members until six months before the Target Retirement Age (TRA).
LCP partner, Erica Beltrami, said: “Although we are seeing greater flexibility when it comes to the amount of choice that members are offered, trustees and employers must be mindful of overwhelming DC savers by offering them too much choice without communicating clear explanations.
“Trustees and employers should make sure their communications clearly state the objectives of each strategy in a language that ordinary members can understand so that those members can make informed decisions.”
Beltrami added that the focus must be on targeting the outcome of each individual’s retirement needs through establishing a pre-retirement communication strategy, “anchored around their TRA but also age milestones”.
Furthermore, the research found that just 25 per cent of schemes have less than half the initial growth phase to allocated to equities, and LCP believe that it is important that saver's money is working as hard as possible in earlier years.
Despite this, 36 per cent of schemes have allocated over 75 per cent of the initial growth phase of their default strategies to equities.