The shift from DB to DC schemes is going to cause a huge increase in the number of people without en...
The shift from DB to DC schemes is going to cause a huge increase in the number of people without enough understanding to make rational decisions on pensions savings because the level of support in deciphering "complex and confusing information" will fall, according to predictions by Mercer Human Resource Consulting.
The company says the problem is caused by companies ending their DB schemes, which is leaving policyholders without support in trying to understand the flood of information provided on all aspects of their pensions.
Mercer says that employers traditionally helped employees understand investments and contributions levels.
Without this support people find it increasingly difficult to reconcile the performance and value of their pensions with issues such as the current downturn in investment markets.
"At a very basic level, companies should decide what level of pension communication they want to give. Too often, communication is haphazard, without any clear idea of what the outcome should be. A communication policy should be as fundamental to a pension scheme as the Statement of Investment Principles," Mercer argues.
It says that it is hard to understand see why companies would not want their employees to understand and be able to value their pension schemes.
Instead, companies should communicate on the schemes they offer at five different levels, including: the legal minimum amount of information; providing basic information on a one-way basis; creating understanding through two-way education; offering personalised guidance; and offering personalised advice.
Ensuring these five levels of communication would help companies build loyalty among their workers and ensure that the value of company contributions made to individual schemes is not degraded.
The majority of financial advisers (85%) believe the number of self-invested personal pension (SIPP) providers will continue to fall in the coming year, according to Dentons Pension Management research.
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