Although a number of employers educate staff about defined contribution investment options, most staff are in a default fund, says Tom Washington
Without education, few employees can have a good understanding of the investment options available through their employer’s defined contribution (DC) plan. Over the years, employers have increasingly taken this on board. In 1999, 44% said they strongly felt they had an obligation to educate members about investment risk and related issues. Now only 13% do not do so.
Other things have changed little over the past decade. For example, in 1999, 47% of respondents strongly believed they should provide independent financial advice to members in some form. This compares with 13% that pay for oneto- one sessions with an IFA this year, and 30% that provide access to such a service.
Default funds enable staff to invest in a pension without needing to actively make a decision about investment types. The proportion of employers that offer a default fund through their main defined contribution (DC) plan has remained fairly constant over the past three years, and, this year stands at 79%.
The default fund’s popularity among staff may be due to apathy or a lack of understanding about the investment options available. It is encouraging that a high proportion of respondents understand the investment strategies and aims of their DC plan’s default fund.
In addition, to ensure the investments they offer remain suited to members, more than three-quarters (79%) of respondents now review the investment strategies and aims of the default fund for their main DC scheme.
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