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12 Feb 2024
by Anna Scott

Balancing risk with support: tips on managing pension challenges

Greater flexibility in how people choose to retire and the removal of a default retirement age bring positives, but also confusion and uncertainty for employees

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What’s the issue?

As more people retire with defined contribution savings, the risks inherent in DC pots come into focus. High inflation and gaps in knowledge lead to employee uncertainty and confusion about whether they can afford to retire and how they should manage their pension savings.

Employers want to help employees with pension decision-making but fear being held liable for any advice they offer. The rigorous level of governance afforded by defined benefit or single-trust DC pensions is less common as businesses outsource DC pensions to master trusts and group personal pensions. Benefits teams are still expected to manage pensions, often without specialist knowledge.

At the same time, 2023 has proven a busy time for pensions consultations, reviews and proposed legislation changes. These include a framework to enable a small number of schemes to act as consolidators of small pension pots, and plans to reduce the lower age limit for auto-enrolment.

What are employers doing about it?

Some employers are moving to master trusts to save costs and cut consultancy fees.

Others are increasing their engagement by assessing the value for money they get from their scheme. This may come in the form or legal advice or an in-house monitoring team to share expertise.

“We are seeing an increase in employers’ engagement in their pension arrangements from assessing the value for money they get from their scheme to encouraging employee engagement with the latest tools,” says Emma Douglas, Managing Director Workplace at Aviva.

“Most employers will have the opportunity to work with their provider to make sure aspects of the scheme such as communications and default investment strategy are right for their workforce and offer value,” she adds.

Tips for employers

  • Assess the data your pension provider shares to inform wider corporate strategies, such as workforce planning.
  • Check if your provider will work with you to make sure aspects of the scheme such as communications and default investment strategy are right for your workforce, and offer value.
  • Find out what provider help is available to make pensions part of your wider financial wellbeing strategy.
  • Protect employees from fraud by offering awareness training, and check formal processes through the pension provider are in place to manage fraud.

Five senior reward and benefits practitioners joined Aviva experts and REBA to discuss their strategies for facing challenges in the future of pensions. Download the full round-table report Pensions strategies for the new age of retirement.

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