Recent research found that two thirds of employers think that pensions are far too complicated and providers are not innovating enough to offer new and progressive products. The research, which looked at the challenges employees face when it comes to pensions, found that almost 45% of employers felt that ensuring all employees have adequate funds when they retire was a huge challenge. While auto enrolment has made a huge difference to the numbers of employees saving into a pension, it is still not enough on its own to ensure that people are saving for a comfortable retirement.
Steve Watson, head of proposition of Smarterly, said: “Since the shift to defined contribution pension plans, there has been very little change to core pensions products. The Government’s interventions in the market in recent years – such as introducing auto enrolment, reducing annual allowances and loosening the rules on accessing funds at retirement has done very little to change the core DC scheme offering and if anything, has simply made the current pensions system more complicated.”
The lack of employee engagement cited by over a third of employers as a challenge could go some way to explaining this. Smarterly’s research found that 36% of employers said that one of the most important factors when selecting a pension provider is good communications that engage members. While employers are now legally obliged to enrol their employees into a pension scheme, providers are also under little pressure to innovate or disrupt the market as they have a more or less captive audience for their products.
Steve Watson, continued: “The pensions market in the UK is crying out for fresh ideas and innovation. While the last 20 years has seen a seismic shift in the way pensions are managed, there has been very little change to the core products – this is desperately needed to bring about the real change that the pensions market in this country needs and to really get people engaged with saving for their retirement. Pensions can, and should be, much simpler in order to significantly improve engagement rates.”
