More than two-thirds of employers plan to use their existing defined contribution (DC) pension plan to automatically enrol their employees, according to research by Towers Watson.
The Towers Watson DC governance survey 2012, conducted among 145 fiduciaries of UK DC plans, found that the national employment savings trust (Nest) is being largely ignored, with only 4% of employers definitely planning to use it as their core pension scheme for auto-enrolment purposes.
It also showed an increase in the focus on investment issues by DC plans, both in terms of the design of the fund range and default strategies to accommodate members who do not make investment decisions.
Nick Cook, a senior consultant at Towers Watson, said: “The research shows us that the large majority of fiduciaries want to actively help employees get the most from their plan and have focused much more on investment options and default investment strategies over the last few years.
“The default option is where most DC members end up, so this focus on default design can add appreciable value to employees’ standard of living in retirement.”
However, respondents admitted that they generally do not understand the needs and wants of their DC members, and only a third felt their plan’s investment fund range was tailored to their specific membership.
This is particularly evident among contract-based schemes where it is still common to offer members a choice of more than fifty investment funds.
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