Fewer than twenty per cent of employers believe they are getting full value from the money they spend on their employees' pensions, says Watson Wyatt.

In a survey, The future of UK retirement savings, the financial consultant found that 18 per cent of employers felt this way, which the financial consultant has attributed to the poor understanding that employers believe their staff have of pensions. Only 27 per cent of employers were satisfied that their employees understood the pension benefits they offered.

Gary Smith, a senior consultant at Watson Wyatt, said: "Many employers need to rethink their employee benefits strategy and retirement deal in particular. In the current economic climate no company can afford to achieve a sub-optimal level of return on such a significant investment. It is unlikely that companies are going to be in a position to increase their overall benefit spend at present, so they should be focussing on making their current spend work harder."

Smith said this may be made possible by encouraging employees to read up on their benefits, but a large part of the focus should be on ensuring the benefits are what the employees actually want.

Over half (58 per cent) of employers were also concerned that their staff are not saving enough for their retirement, which Smith has attributed to a lack of employee understanding, and of employees not helping themselves. "Many employers have switched new staff - and increasingly existing staff - out of defined benefit pension plans into defined contribution plans. Whether through inertia or positive choice, employees appear less inclined to join DC schemes and when they do so, many do not take full advantage of the employer matching contributions on offer," Smith said.

- Pensions Age January 2009

Share Story: