Pension flexibilities 

[MUSIC PLAYING] [Pension Flexibilities]

In this edition of thesis spotlight, we take a look at how you could potentially improve your employees retirement benefits by over 50%, protect them from scams, and avoid the employer and trustees facing unnecessary regulatory and reputational risks. Or to put it another way, by not taking action, you and your people could be losing out significantly.

[What are pension flexibilities?]

Historically, most members of defined contribution plans were told how and when to access their savings for your pensions annuity with the option of a tax free lump sum. But in 2015, this changed. Members were given significant flexibility to choose how and when to access their savings via any combinations of annuity, drawdown, and cash lump sums. Now, this can be a great thing if members are supported to make the right decisions for them.

[Flexibility has introduced complexity]

By 2018, the Financial Conduct Authority was warning that many members were losing out due to high charges, poor investment returns, unnecessary taxation, and loss of state benefits. Members were getting decisions wrong and they still are. And it's no wonder it's complicated and many members are still not being appropriately supported.

Now, Mercer's DC MOT research has found that 34% of DC schemes still don't offer members access to all the retirement options. 68% of employers don't offer retirement planning courses. And over 80% of employers don't facilitate guidance or advice at the point of access and benefits increasing the potential for scams.

[Pension flexibilities are a live HR risk]

There is no longer a set retirement age. People are often accessing benefits while still working and if things go wrong. For example, staff pay too much tax, incur unnecessary charges, or scammed, or otherwise feel they lose out, they will complain to the employer.

[Implementing a safe and secure solution]

Many more than defined contribution plans offer effective retirement support if the employer asks for it. And if they don't, there are many others that can, either as part of the core pension service or as a dedicated high quality retirement vehicle.

Now, implementing an effective retirement solution can help individuals to maximize their retirement income, keep them safe from scams, and protect the employer from regulatory and reputational risks. To find out more, contact your usual Mercer DC consultants or email dcmot@mercer.com. We look forward to speaking with you.

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