‘Market pressures’ drive DC provision: survey

The senior DC consultant at Towers Watson said employers need to think carefully about what they wanted their DC pension to look like, rather than assuming it is simply not a defined benefit scheme.

Mr Aitken said: “Employers need to decide what they want their DC scheme to be, beyond not being DB. Until now, DC has done a great job of not being DB and can no doubt continue to do so. But given the huge sums of money entering DC schemes, we are seeing a desire to do better than ‘not DB’.”

Mr Aitken’s comments came as 65 per cent of 126 employers surveyed by the consultancy firm said they are mainly motivated to offer DC pensions by the need to compete in the market.

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Only 15 per cent of employers said that the main objective for DC provision was ensuring that workers achieve an adequate income in retirement.

Some 22 per cent of employers said that DC schemes can provide a decent income in retirement. By contrast, 80 per cent of employers said DB schemes achieve this aim.

Encouragingly for advisers, almost three-quarters of those surveyed said employers should offer additional services to help employees in retirement.