Only 15% of respondents said their main reason for providing a defined contribution (DC) pension scheme is to ensure their employees save for an adequate retirement, according to research by Towers Watson.
Its DC pension strategy survey, which surveyed 126 employers, found that 65% of respondents cited market competition as their main objective for providing a DC pension to staff.
In comparison, 6% of respondents said their main objective was to comply with legislation, such as auto-enrolment.
Less than half (42%) of respondents thought their DC scheme helps employees to retire, while only a quarter (25%) thought their pension scheme ensures employees have an adequate income in retirement.
The research also found that 86% of respondents felt that a defined benefit (DB) pension scheme helps to retain employees, while 80% believed DB pensions ensure employees have an adequate retirement income.
In comparison, just 22% of respondents said DC schemes ensure employees have an adequate retirement income.
The survey also found:
- 79% of respondents believed employers should ensure their DC scheme is tailored to meet employees’ needs.
- 58% of respondents thought their employees will still be able to retire at the age of 65.
- 38% of respondents thought it is more likely their workers will retire between ages 66 and 70.
Will Aitken (pictured), senior DC consultant at Towers Watson, said: “At the current time, many employers have focused on what goes into DC, market competitive contributions, rather than what comes out: adequate pensions.
“Employers need to decide what they want their DC scheme to be, beyond not being DB.
”Employers do believe they have a role in enabling their staff to retire. That’s not quite the same thing as ensuring their staff will be able to retire.
“DC is often about providing employees with a framework that offers the possibility of an adequate retirement, rather than the likelihood.
“As we see the workforce age, we may see employers going further to increase the likelihood of those possibilities, to ensure that they are not left with unwilling employees who can’t afford to retire.”