Half of UK employers are concerned their staff will no longer use the company’s pension plan to support themselves in retirement due to pension freedoms, research has shown.
According to a survey published by Barnett Waddingham and Standard Life, which polled 58 businesses representing around 750,000 employees, 36 of the companies felt pension freedoms have had an impact on how members are choosing to exit their workplace.
With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of defined benefit (DB) schemes and to move their nest eggs into defined contribution (DC) plans.
Figures published by Mercer in April showed that as much as £50bn has been pulled from final salary pension schemes in the last two years.
According to figures released by HM Revenue & Customs (HMRC), more than £14bn have been unlocked from defined contribution pensions since 2015.
More than half of employers (59 per cent), however, doesn’t know how their employees have been accessing their pension pots.
Around a quarter said their workers have taken the 25 per cent tax-free cash lump sum and invested the remaining income in drawdown.
Some 15 per cent said employees withdrew the entire pot as a single cash sum, while 3 per cent said they withdrew the entire pot as a series of cash sums over a short period.
Only 2 per cent of employers’ report annuity purchases.
The research also showed that communication and engagement with staff about their pensions is a key short term objective for 70 per cent of the employers.
However, this is balanced by half of the respondents feeling the priority is simply to keep up with regulations.
According to Paul Leandro, partner at Barnett Waddingham, there is a clear discrepancy between what employers want to do to support staff versus what services they actually do offer.
He said: “There are many reasons for this, but the survey results suggest regularly fatigue rather than indifference is a key reason.
“Rather than seeing the pension system as political football, the government needs to listen to employers.
“Our fear is that further changes to the DC pensions system will lead to disengagement of UK corporates from the system.”
The research also showed that 67 per cent of employers did not think the rise in auto-enrolment minimum contribution rates will increase opt-out rates.
From April 2018, the minimum total contribution will increase to 5 per cent, and one year later, it will rise again to 8 per cent.
The government is currently conducting a review to auto-enrolment, with a report due to be published in December.
maria.espadinha@ft.com
