We are pleased to present this research into the issues of Defined Contribution (DC) pension schemes, conducted for Partnership by Echo Research Limited.
As the growth in DC provision continues, individuals increasingly need to understand a host of issues:
- Investment choices
- Appropriate contribution levels
- Effect of inflation
- Additional benefit requirements
- Longevity
- Choices at retirement
The survey reveals the lack of awareness of these aspects of pensions:
- Pension professionals and employers highlight the lack of understanding of DC pension provision.
- Awareness of choices and process at retirement is particularly low with very few professionals believing members understand where to go for guidance.
- Members are unaware of the nature of their pension, what they can receive at retirement and how to get the best income possible.
- Members often don’t understand annuities and are unaware of the availability of enhanced annuities.
- Many professionals accept that the decumulation phase receives less focus than other areas of pension schemes.
- Information on options is received too late before retirement leaving insufficient time to improve understanding.
- Advice is difficult as members perceive it will be expensive but the vast majority of professionals and employers believe it is the way to achieve the best outcomes in retirement.
- This highlights a need for swift, comprehensive information in easily digestible formats, with access to guidance at the appropriate stage of the retirement process and the ability to compare and contrast annuity options before deciding.
We believe many of these issues can be addressed to help provide significantly better outcomes in retirement for scheme members. The solutions available can minimise the cost to schemes and employers while providing measurable improvements in members’ incomes – for the whole of their retirement.
Andrew Megson
Managing Director, Retirement
Partnership