UK - Members of defined contribution pension schemes are considerably less aware of their likely income in retirement than members of defined benefit schemes, new research by Watson Wyatt has found.
According to the survey, 65% of DC scheme members have “no idea or only a vague idea” of their likely income in retirement, compared to 31% of DB scheme members.
“While clearly it is harder to estimate retirement income from a DC scheme than it is from a DB scheme, it also appears that DC members are less engaged with their pension scheme,” said Gary Smith, a senior consultant at Watson Wyatt.
“This is a major concern because, if anything, it is DC scheme members who need to take the most active interest in their pension planning.”
In addition, DC members were more critical of the information provided on their scheme than DB members.
Some 44% of DB members said their current pensions communication material was “straightforward” compared to only 32% for DC. Furthermore, 34% of DC members found the material “complex” (24% for DB), 24% described it as “full of jargon” (16% for DB) and 19% described it as “boring” (14% for DB).
“It would seem that communication is evolving to become a more critical and complex issue,” said Smith. “A strategy that is going to address these issues needs to take a more dynamic, multi-dimensional approach that appeals more to individuals.”
DC members listed more examples and help on planning retirement as the most important ways information about pensions could be improved.
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