The 2012 pension reforms will create a further tier in occupational pension provision, according to Nick Walker, pensions officer at the Union of Shop, Distributive and Allied Workers (USDAW).
Addressing delegates attending the National Association of Pension Fund’s (NAPF) annual conference in Manchester, Walker said that employers would hang on to defined benefit (DB) pension schemes for long-serving staff and offer a higher-level defined contribution (DC) pension scheme for more recent hires. New joiners would be offered a lower-level DC pension scheme.
Walker urged employers to ensure new joiners got the chance to participate in the higher-level DC eventually. He added: “Those that have been auto-enrolled should step up to a proper level of DC after two years with the organisation.”
He also warned employers to be careful that the pressures of managing DB schemes did not prevent them from offering a decent DC pension scheme.
Jenny Condron, partner at Mercer, said that the UK workforce was already split up into the “have’s” and the “have not’s” with many employees split between DB and DC schemes. She added: “There is certainly the perception that DC is worse than DB.”
Condron said it is essential that employers make sure their employees understood the value of their pension benefits. She said: “Unless organisations start to engage employees with the benefits they are providing, they are wasting millions of pounds that could have otherwise been better spent.”
For more articles on the 2012 pension reforms