With the move from Defined Benefit (DB) to Defined Contribution (DC) pension provision, employers have transferred the capital, inflation, longevity, conversion, funding and legislative risks to members. However, unlike DB trustees who are supported by teams of advisors to address these risks, DC members are not.
Many members are neither competent nor, in many cases, willing to make complex DC decisions. As such, members need to be educated to address their lack of understanding and to encourage them to play an active part in their retirement planning.
As the DC market develops, we are seeing an increasing provision of technically detailed information to members. However, many find this difficult to comprehend.
For cost reasons, information provided is predominantly generic, rendering it irrelevant or inappropriate to many members’ specific circumstances. Furthermore, the format and media used (e.g. pages of typed print) is often uninspiring.
Information provision is not the same as communication. If this is not recognised and addressed, members will ‘turn off’ to DC pensions, putting their financial futures at risk and reducing the value that they place on the benefit. Given the costs invested, this cannot be in the sponsoring employer’s interest.