Forty per cent of employees transferring their defined contribution pot are unable to rejoin their employer’s pension scheme and receive the same employer contribution as to prior the transfer, Wealth at Work has revealed.

According to the company’s pensions changes survey results for 2017, 19 per cent of employers require their workers to transfer their pension to another provider if they wish to take money from their DC pension (from age 55) whilst still working for the employer.

Of those employees who have to move their DC pension elsewhere in order to access it, 40 per cent are not allowed to then rejoin their employer’s DC scheme and receive the same employer contributions as previously. Wealth at Work speculated that this may be a mechanism to cause employees to think carefully about accessing their savings.

However, nearly two-thirds (62 per cent) of employers do allow staff to access their DC pot whilst still working for them, with 35 per cent enabling employees to do this as many times as they choose, and 27 per cent allowing this a limited number of times.

Once an employee has reached their scheme retirement date, 27 per cent of employers do not allow employees to take income from their pension, instead requiring the employee to transfer out to access the fund.

The survey said there are a number of reasons why employers may not allow this, such as not being equipped to facilitate the pension flexibilities, or not wanting the administrative burden.

Forty-six per cent of employers do allow employees to take an income from their pension as often, and as much, as the employee likes, while 12 per cent allow limited access, restricted to a certain number of withdrawals.

During the accumulation stage, 35 per cent of employers surveyed do not provide a choice of glidepaths covering the three main retirement options (drawdown, annuity, cash). However, of these 35 per cent, 19 per cent plan to change this situation in the future and offer a choice of glidepaths.

If no glidepath is selected by employees, 39 per cent of employers will default these employees into an annuity-targeted default fund. Wealth at Work stated that this is “surprising, given the significant fall in annuity purchase since the pension freedoms took effect”.

Wealth at Work director Jonathan Watts-Lay added: “In this new world of freedom and choice in pensions, an annuity-tracked glide path might not be the most suitable option, leaving many on an investment route which doesn’t match their retirement plans.”

Over half of employers (53 per cent) have yet to put any financial education, such as educational seminars or webinars, in place for employees during the pensions accumulation stage, and almost 70 per cent of employers do not provide a ‘full’ retirement income service for employees at-retirement (eg financial education, guidance and advice, and the ability to provide all retirement income options, individually and as a combination).

Commenting on these findings, Watts-Lay said: It’s clear that many employees are simply abandoned at-retirement and are left incredibly vulnerable to making poor decisions due to the lack of support available, or worse still being scammed by ‘an offer too good to ignore’. Financial support at this point must be made a priority given the enormity of the decisions that employees face at this stage of their life.”

For the report, Wealth at Work surveyed over 100 pensions, rewards and benefits, and HR professionals during August to November 2016.

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