Sponsors need to determine how they measure success before they can improve the outcome of DC schemes, J.P. Morgan Asset Management has advised in its white paper on scheme design.

The paper, DC on target, asserts that companies must ask themselves what they hope to achieve for members within their DC offering.

J.P. Morgan Asset Management head of UK DC Simon Chinnery said: “Companies have a very real ability to place a greater number of members on a prudent DC path by influencing constructive behaviours through strategic scheme construction. To accomplish this successfully, they must first develop a clear vision of what they want that path to be and where it should lead, asking themselves: ‘What do we, as a company, hope to achieve for members with a DC offering?’

“By defining the goal for a DC plan and determining what constitutes success for that plan, sponsors can reduce (and potentially remove) some of the uncertainty that can often surround the DC framework and help members achieve a more secure retirement.”

The white paper covers three key points that affect retirement replacement income, including saving and securing more retirement income with the underlying message that current contribution rates appear much too low; investing and the view that target date funds represent a significant advancement in bringing the professionally managed diversification and risk-efficiency benefits of institutional portfolios to individual scheme members; and spending and annuity purchase trend changes due to new legislation, product innovation and an increasing need for phased retirement.

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