UK - Over one-third of company executives are not sure the DC plans they operate will provide an adequate retirement to members, according to research from SEI.
Those executives running contract-based schemes admitted that they were set up to facilitate cost-savings for the employer and 58% said that avoiding the burden of trusteeship was an important consideration in their choice.
The survey of 100 executives backs up research from both the UK's National Association of Pension Funds, Association of Consulting Actuaries and Government Actuary's Department that contributions going into DC plans are inadequate.
Almost half the respondents running contract-based schemes in the SEI survey believe members are not sufficiently informed to make decisions about their pensions and investments.
Four in every ten of this group believe employees are offered too much choice when it comes to investment funds.
Previous research by the NAPF suggests that 94% of members in DC schemes select the default investment option when there is one available. This figure is not far from evidence from Sweden on the percentage of active choices made by ordinary workers with their contributions to the state-supervised PPM savings system.
As reported yesterday by IPE, Cass Business School has also called for employers to establish more effective default options or risk falling under the scrutiny of The Pensions Regulator.
Co-author of Cass's latest report "Dealing with reluctant investor", Debbie Harrison, said: "While it is true that the action of offering a default does not constitute individual advice under the very precise regulatory meaning set out by the FSA, it is equally evident that ‘reluctant investors' in DC schemes assume that the default fund has been chosen to meet their specific needs."
Today The Pensions Regulator issued consultation documents on the running of DC schemes, which will form the basis of eventual regulation.
Patrick Disney, head of European institutional business at SEI, said: "The government, regulators and the industry face a collective challenge to try and address the problem of future pension provision. It would seem that responsibility should not lie entirely at the door of employers yet, as the survey reflects, if there was a way for companies to provide more support for employees without increased burden or governance, they would be likely to embrace it."
SEI has just launched its own DC Master Trust, which provides scheme governance via an outsourced and independent trustee body, headed by Allan Course, formerly of Watson Wyatt and now with Capital Cranfield. The idea is to spread legal, administrative and accounting costs across Trust participants, who can each have specific designs for benefits and terms.
SEI uses its own manager of manager process for investments and there is the option of automatic lifestyling.
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