UK - Schemes must radically overhaul their communication processes if the voluntary approach to pensions is to survive, Hewitt Bacon & Woodrow claims.
Consultant Tony Bailey says automatic scheme enrolment alone will be insufficient to adequately boost savings levels.
He says employers must take account of the biases and influences that affect their workers’ decision-making processes as people are not “rational calculating machines”.
One way to boost pension savings is if employers can convince workers to commit to increasing their contributions at a later date.
Members often think solely in terms of take-home pay Bailey explained, so if the increases coincide with pay rises, they will believe that the increase has come at little or no extra cost.
And to ensure that automatic enrolment boosts scheme membership and savings levels, Bailey said members must be presented with a limited range of simple options to choose from when they join their scheme.
He said that if members are faced with a complex situation, they will defer making a decision.
The closure of the BT Pension Scheme (BTPS) to future accrual means 20,000 active members will move to an 'enhanced' defined contribution (DC) scheme, after the company reached a deal with the union.
In this week's Pensions Buzz we want to know what you think of the government's proposals set out in the DB white paper, which include new powers for the regulator.
The pensions watchdog has been through some testing times and is making significant changes to the way it regulates. Speaking to Stephanie Baxter, Mark Boyle takes stock and looks to the future
Enhanced powers for The Pensions Regulator (TPR) to prosecute and fine company directors who "wilfully or recklessly" put their defined benefit (DB) pension scheme at risk will be hard to enforce, commentators say.