Research by provider of financial education, guidance and advice Wealth at Work has shown that when no glide path is selected by employees, 43 per cent of employers will still default employees to an annuity tracked glidepath.
This is despite a significant fall in annuity purchase as a preferred option for employees.
Results from the survey, which questioned 94 people over a period of three months starting in August this year, also showed that only 11 per cent of employers believe their employees are saving enough for their retirement.
Additionally, employees are unable to access the new pension flexibilities through their workplace, with 26 per cent of employers not allowing their employees to take money from their pension (from age 55) while they are still working for them.
The results also revealed almost on third - 32 per cent of employers - do not provide access to the new pension flexibilities in their scheme at-retirement.
Finally, the survey also found that 40 per cent of employers do not offer their employees financial education around the pension flexibilities at-retirement.
Jonathan Watts-Lay, director at Wealth at Work, said of the results: “This is pretty alarming given the significant fall in annuity purchase over the last 18 months.
“In the new world of freedom and choice, in pensions, an annuity tracked glide path might not be the most suitable option and it may leave many on an investment route which is not correctly aligned to their retirement plans.
“This could potentially result in a reduced income in retirement, with what may be for some almost disastrous consequences.
“It is crucial that employers provide financial education about the different glide path options available in order for employees to make appropriate selections to help optimise income at-retirement.
“The fear of employee pension depletion, coupled with the increased cost of administration or simply not having the infrastructure in place to provide full access, is another reason why employers may not be able to provide the new pension flexibilities.”
Daren O’Brien, director at Aurora Financial Solutions, said: “These surveys are always really useful for IFAs as most of the time they confirm what we are seeing when we talk with employers.
“Employers feel that their liability starts and ends with making and facilitating contributions for pensions and they don’t really want to get involved in fund decisions and don’t have the expertise.
“I believe that it will take time to educate employers about the new pension freedoms through auto-enrolment so that they will start to look at the retirement end rather than just the payments.
“Despite the recent changes with annuities the employers haven’t yet changed their stance and so any additional education for employers will benefit their staff and improve their employee benefits.”
David Trenner, technical director at Intelligent Pensions, said: “Pre-1988 membership of pension schemes was compulsory for 12 million people, so they were likely to be saving enough for retirement even if they didn’t want to.
“Following a CPS report in 1985 the 1986 Social Security Act allowed members to opt-out of employer schemes and destroyed the cross subsidy between older and younger members, meaning that ongoing defined benefit schemes have all but disappeared in the private sector.
“The introduction of auto-enrolment is a small step in the right direction, but contribution levels are very low. Is it any wonder then that people are not saving enough?”
ruth.gillbe@ft.com