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Defined contribution schemes good for employers

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HR managers can see the benefits of defined contribution (DC) pension schemes for employers but are less sure of their benefits for employees.

Senior HR and benefits managers from some of the UK’s largest employers were polled at a Watson Wyatt workshop and some 78 per cent of attendees said that, as a basic design concept, DC can meet the pension scheme needs of employers either extremely or fairly well.

But only 42 per cent thought that DC can meet the needs of an individual employee at least fairly well, with 35 per cent saying that employees needs could only be met ‘with difficulty’.

The diverse response from the 50 workshop attendees to the question of whether DC can meet the needs of individual employees appeared to reflect a wide range of views about how well employees engage on DC.

Gary Smith, a senior consultant at Watson Wyatt, said: “The comments made during the workshop were driven by participants’ own experiences of DC, levels of financial understanding within their organisations and the effectiveness of communications.

“Our small poll neatly highlights the need for employers to really take control of their DC plans and address effectively the issue of employee engagement if DC is to succeed for individuals.”

He added: “It comes as little surprise that there is more of a consensus of the benefits of DC to employers.

“DC fits in very well within a total reward framework and the growing trend towards offering flexible benefits and encouraging a more holistic approach to financial empowerment for employees.

“DC gives employers the opportunity to really take control and ownership of their pension arrangements and, thereby, maximise the return on their investment in pensions.”

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Annie Hayes

Editor

Read more from Annie Hayes