UK - Employers should shell out for staff education about defined contribution schemes or face what could be the next industry scandal over disappointing pensions, Morgan Stanley has warned.
According to Ian Martin, head of institutional business at Morgan Stanley Investment Management, many employees drift into the default option of a DC scheme in the hope “that it will all turn out for the best.”
In his contribution to the debate on individual investor responsibility - ‘Defined Contribution - A Crisis Waiting to Happen?’ - Martin asks: “How many plan members are equipped to take such fundamentally important decisions and what will be the impact on their retirement income expectations?
“Ask the average guy in the street from whatever background, profession and intelligence, about savings and investment and you will see his eyes glaze over. For years in this country, people expected the State to look after them in old age - failing that, your employer would through a final salary scheme.”
He added: “Trustees who try to be helpful by offering you lots of investment options, can simply bewilder the average punter. Choice on its own, is not enough. What we all need is help and guidance through the maze of decisions, not just at outset, but ongoing through tactical realignments of our portfolios.”
*The Society of Pension Consultants held a special strategic conference last week entitled ‘Employer Sponsored Pensions: New Dawn or Nightfall?” Following a innovative feedback feature at the conference, 98% of delegates said they agreed there is currently a gap between individuals’ expectations of, and contributions to, their pension. More than two thirds thought the long term role of the State should be to provide a basic pension for all.
By Madhu Kalia
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