UK - Improved communication to members of defined contribution (DC) schemes needs to be a higher priority for trustees ahead of auto-enrolment in 2012, Aon Consulting has warned.

A survey of 120 DC trustees conducted by Aon Consulting revealed 61% of trustees sitting on DC pension fund boards believe members do not know how much their pension is worth.

The research showed just under 80% of trustees were confident they had an understanding of the estimated level of members' projected pensions at retirement, but of these only 39% believed scheme members had the same understanding.

Aon claimed the findings reveal a "serious gap in communications" between trustees and members of DC schemes, yet when asked about the key challenges facing their schemes only 37% believed member communication to be the most important issue.

Instead, 77% thought keeping investment options suitable for members was the most important issue, while administration was the seen to be the biggest challenge for 35% of respondents, although finding suitable trustees was not regarded as a serious issue.

However, Helen Dowsey, principal at Aon Consulting, claimed the gap between trustee and member knowledge is a "big problem that needs to be addressed to ensure the future health and viability of the DC model".

In particular, she highlighted while the issue is acknowledged by some trustees, it is "clear it needs to become more of a priority", a sentiment echoed by both The Pensions Regulator (TPR) in its corporate business plan, and by the Public Accounts Committee in its report on the progress of TPR. (See earlier IPE story: Improving DC governance is key TPR target)

However, Dowsey warned the lack of member understanding holds "significant policy implications for the UK government" as it starts to roll out pension reforms in 2012, including the new personal accounts regime, which includes auto-enrolling approximately 10 million workers into either an existing "good" pension or the new national trust-based DC scheme.

She added: "If members of company-sponsored DC pension schemes do not understand their benefits, then there remains a danger that these ‘enlisted' pension scheme members will see the new arrangements as little more than another form of income tax."

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