Towry Law has added to recent criticism of current defined contribution (DC) pension scheme plans, saying that many are failing to deliver good value to employers and employees.

The wealth advice business said this leads to employers wasting money, and places the retirement provision of employees at risk.

All companies, particularly SMEs who run DC schemes, should ensure they seek the most appropriate corporate advice they can and check that schemes are meeting employees' needs.

"The corporate pensions industry is still largely focused on selling pension schemes rather than providing the overall client-focused service proposition that is so desperately needed by both employers and employees," said Pan Andreas, head of corporate clients at Towry Law.

"DC schemes are a popular method of pension provision, but typical industry practices mean that employers may receive poor value for money.

"We call on directors of SMEs to ensure they receive clear and impartial corporate advice, and that their employees are effectively engaged. If they are not, employers are likely to be wasting their money now and will face huge problems in the future as employees understand the true value of their pension provisions," he added.

Fidelity International has also expressed concern at the value of DC, and says that some members may receive a nasty shock when they look at their 2008 statements.
Julian Webb, head of UK DC at Fidelity International, added: "Member communications will play a vital role as 2008 pension statements start to land on doormats."

Webb echoed Andreas' call for company engagement: "Companies need to work with their advisers to set these falls in the context of the long life of a pension - they need to head off hasty decision making and demonstrate how time can help a pension recover from market falls.

"Member communication is a vital component of SDC pensions. It helps people see the benefits of joining a company scheme and it nudges them towards more informed decision making. Companies that act pro-actively will be better placed than those who suddenly start seeing employees opt out of the scheme or reduce their contribution levels."

- Pensions Age February 2009

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