UK - Forcing employers to educate staff about their pension choices will be another burden for firms, Hewitt Bacon & Woodrow claims.
The consultant said it welcomed attempts – outlined in the department for work and pensions’ Informed Choices paper – to increase membership. But it warned that government intervention would lead to increases in both the burden on employers and the costs of providing schemes.
Pension consultant Andy Cox (pictured) said providing the necessary educational support needed to be balanced with appreciation from employees.
He said: “Faced with the evidence that many people are under-providing for retirement, it’s only natural for the DWP to want to take action to reduce the burden on the state system.
“However, employers who have decided to provide pension schemes should be free to tailor them and incur costs only when they are valued by their workforce and suit their recruitment needs.”
He said that Hewitt’s experience in the US backed up some of the DWP’s approaches, including proposals to give new staff automatic membership of their company scheme.
The consultant found that while most employees valued the freedom to choose, in practice they found it difficult to make decisions about whether to join a scheme, how much to save and where to invest.
Cox said: “The DWP has identified the importance of increasing financial literacy to help address this problem, but this may be too late for much of the current workforce, so much of the burden and cost will continue to fall on employers.
“While employers are free to offer pension arrangements – other than stakeholder pensions – they should also have the flexibility to use communications approaches and contribution incentives in ways which best suit their needs.”
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