Simplification is the key - Centre for Policy Studies

More specifically, employers are now seeking positive emotional engagement by
satisfying their employees’ desire for flexibility, which means going further than simply
offering to match employee contributions to group DC schemes. “Flexible benefits”
programmes are being offered, which allow employees to direct employer contributions
to benefits other than pensions (and buy or sell benefit components). At least two major
employers (both are banks) are currently replacing their schemes’ “pensions” label with
“creation of wealth for retirement”. They are offering platforms that include an ISA and a
SIPP to receive the cash proceeds of maturing employee share plans (SAYE plans and
options), alongside Group DC schemes.
Employee feedback has indicated that they like the portability of products, such as ISAs,
that are not part of an occupational pension scheme, partly because they are not
accompanied with the risk of a transfer value “haircut” when moving jobs. But many
employees say that they miss the inherent paternalism that accompanies a scheme. The
employer response to this has been to offer guidance to understanding outcomes, for
example forecasts of what employees may expect to receive in retirement from a range
of differently risked investments (e.g. low, medium, high).
Employers, subject to commercial pressures, are ahead of government in responding
imaginatively to savers’ needs. One initiative that the Government could take would be to
allow scheme sponsors to formally re-characterise their pension schemes as lifestyle
savings schemes, which is what they are becoming. Ideally this could be achieved
without unhelpful interference, such as a reduction in trustees’ flexibility and loss of
control over schemes.
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