UK – Pension consultant Watson Wyatt has called for greater communication about defined contribution pension schemes from employers to avoid the possibility of another pension “mis-selling” scandal.
Watson Wyatt says employers need to consider very carefully the matching contribution philosophy. “In our experience, employers have become more concerned to focus employee benefits where they are most appreciated,” it says.
“But it is important that such schemes are well communicated to employees. One can imagine yet another mis-selling scandal if pension scheme members say they did not realise that their employer would pay, say, 2% for every 1% they paid.”
Companies need to be aware of potentially disgruntled employees complaining that they were not given enough information, Watson Wyatt says.
It said that around 47% of DC schemes that it surveyed in its twice-yearly pension plan design survey are structured so that the employer contributes additional “matching” contributions for those staff who opt to make extra contributions. This is up from 37% in 2000, it said.
“Without doubt there are some good DC schemes around,” says Colin Singer, a partner at the firm. “But average rates of contribution remain low. Potentially this is the most worrying aspect of the shift towards DC.”
The survey, which canvassed 219 organisations, is to be published shortly.