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JLT says staff incapable of managing pension risk

Employee benefits provider warns employers are unsure how risk sharing in workplace pension provision can be reinvigorated.

By Donia O'Loughlin | Published Jun 19, 2012 | comments

Employers recognise employees neither understand nor are capable of managing pension risks but there is no consensus over how to help them, employee benefit provider JLT has warned.

The latest JLT survey, canvassing 250 large private sector employers, revealed while it is recognised employees may not understand or be able to manage risks, including investment, inflation and longevity, being transferred to them, employers are unsure how risk sharing in workplace pension provision can be reinvigorated.

The survey looks at the issue of pension risks in the context of both the defined benefit to defined contribution trend, and the management of DB liabilities.

According to Phil Wadsworth, chief actuary of JLT Benefit Solutions, there is “no clear agreement” among employers over the measures that are most likely to encourage risk sharing and many employers are unaware of the reductions in red tape that have recently taken place.

He said: “The survey results may also reflect a view that, without additional incentives for employers, it is quite simply too late to reverse the DB to DC trend.”

The findings in relation to liability management of DB schemes showed that, despite all the rhetoric over pension scheme de-risking, few schemes have been involved in any exercise and most employers do not have any plans to conduct an enhanced transfer value, pension increase exchange or any other form of liability management strategy in 2012.

Mr Wadsworth said: “More than half of UK DB schemes will have had a triennial valuation in March or April and with employers being warned to expect an increase in deficits.

“We envisage a growing interest in cost effective options for them to remove pension liabilities from their balance sheets.”

The survey also reveals that, not withstanding the latest government consultation on the topic, there is still confusion over what is required by schemes to address inequalities arising from guaranteed minimum pensions.

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