One in five British workers has turned down a job because they felt that the benefits on offer, including pensions, were unattractive.
Friends Provident’s 72 Point Survey, Job for life Age Report found that more than two thirds of employees aged over 50 would select an employer contributory pension scheme as their favoured benefit. So, workplace pensions are still valued by employees but will this continue? I ask the question because there is a great deal of negative comment around pensions, particularly defined contribution (DC) pensions. DB schemes are closing at an ever faster rate and analysts, in their eagerness to stem the flow, are making critical comparisons with DC provision. They highlight that defined contribution schemes shift the financial risk and responsibility to individuals away from employers and that the recent economic downturn has badly affected pension values. Whilst all this is true we do stand in danger now of ditching the lifeboat. Continuous negative comment about DC will not encourage employees to sign up and engage with their retirement saving; something the industry and employers try hard to achieve. If DC becomes ‘anchored’ to the perception that it is second rate and risky, then don’t be surprised if the future financial situation for the over 65s becomes more untenable. According to the latest figures from the Department for Work and Pensions an estimated 1.4 million pensioners are working after retirement age and the numbers are going up. Nearly 30% of pensioner couples generate income from paid employment. In 2007/08, there were 2.5 million pensioners living in UK households with below 60% of contemporary median net disposable household income before housing costs. To add to the pressure the cost of basics impacts more on the elderly. Figures from the Alliance Trust Research Centre show that even falling inflation does not have the same benefit for the over 75s as it does for younger people. Elderly people have to cope with an inflation rate 77% higher than that for the under thirties because the cost of food and utilities remains high. People reaching retirement age today have more financial responsibilities than previous generations because of increased longevity and expectations. At least a fifth (18%) of retirees are still paying their mortgage and consumer research by Friends Provident indicates that 57% of retirees also have parents who are retired. A third of these are supporting their retired parents financially or expect to do so in the future. The need for retirement savings is more pressing than ever so we should stress as often as possible that DC has an important role to play. A fine example could be set by MPs voting to switch their own pensions from DB to DC. Martin Palmer is head of corporate pensions marketing at Friends Provident
