A pension review assessing your members' retirement readiness
For too long, the focus of defined contribution (DC) plans has been on contributions paid in and meeting regulatory and governance requirements – to the detriment of achieving the right outcomes for employees.
Do you know your pension well enough to feel confident your members will be able to retire when they want to with the income they need?
Get to know your pension scheme and take the right actions
With most tasks, the best approach is to set a goal and work out how to achieve it. DC pension schemes have slipped into the opposite mindset by focusing too much on processes and inputs to the detriment of employee outcomes. This is understandable given the many pressures faced by trustees and companies, but a rethink is needed on DC pension performance.
Mercer’s Retirement Readiness Index (RRI) is a retirement plan review that helps you refocus on your scheme’s core purpose – providing enough money so that employees can retire when they want with the income they expect.
The RRI produces an objective evaluation of your members’ retirement benefits based on the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards and provides you with insight into your plan across four core areas:
The scheme’s design
The take-up rate among employees
The investments offered
When and how employees access their retirement benefits
The RRI is a pension review that targets member outcomes
Very few DC schemes are likely to provide the pension performance their members hope for without interventions to improve the position.
The PLSA’s Retirement Living Standards give individual pension savers a guide to how much they will need for a certain standard of living when they stop work. It is the UK’s standard measure for benchmarking and retirement adequacy.
Our RRI carries out a retirement readiness assessment for each employee against the PLSA’s standards. It also measures the potential impact of different interventions and enables you to take action that often involves direct communication with employees.
Actions schemes have put in place with the RRI include:
- Encouraging employees to make the most of company-matched contributions to improve retirement adequacy
- Contacting women going on maternity leave to discuss the implications for their pensions
- Adjusting the rate at which new employees are auto-enrolled
- Changing service-based contributions to be fairer to younger employees
- Adjusting the scheme’s investment strategy or reducing the charges that members pay
Getting started on your pension review with our RRI
- When did you last think about the standard of living your scheme members might expect in retirement?
- Do you want to support your employees with a retirement readiness assessment and planning?
- Are contributions to your scheme at a low level (typically 10% or less) or at the auto-enrollment minimum for some members?
- Have you considered the potential impact on HR planning if your employees don’t have enough to retire?
- Do you want employees to have a better understanding and appreciation of the benefits you provide?
- As an employer, have you considered the role that pensions and benefits play as you compete to recruit and retain talented people?
Retirement Readiness Index (RRI)
|Year of review: 2021||The assessment can be done against the absolute levels of Retirement Living Standards or pro-rated for your employees' tenure in your business. The assessment can assume they buy an annuity in retirement or take benefits through drawdown.|
|Assessment type: Tensure / Drawdown|
|Average: B+ for industry sector|
Before you access this page, please read and accept the terms and legal notices below. You’re about to enter a page intended for sophisticated, institutional investors only.
This content is provided for informational purposes only. The information provided does not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities, or an offer, invitation or solicitation of any specific products or the investment management services of Mercer, or an offer or invitation to enter into any portfolio management mandate with Mercer.
Past performance is not an indication of future performance. If you are not able to accept these terms and conditions, please decline and do not proceed further. We reserve the right to suspend or withdraw access to any page(s) included on this website without notice at any time and Mercer accepts no liability if, for any reason, these pages are unavailable at any time or for any period.