From the blog: Since the pension reforms were introduced in April 2015, retirement is being talked about more than ever before. This is mainly because these laws will affect almost every employee and employer.

It was interesting to find out from our recent research that many employers are not offering these new drawdown options to their staff:

  • Only 43 per cent of employers plan to offer a drawdown option as part of their pension plan, even though 87 per cent of employers believe that their staff will want to access some or all of their pension after the age of 55.

  • Only 6 per cent of employers surveyed were offering drawdown in a trust-based arrangement. The majority who are offering drawdown are using a provider or broker to facilitate access.

  • The majority (69 per cent) believe that managing and offering drawdown is too difficult. Other barriers include governance issues (59 per cent), no desire from the employer (53 per cent) and cost (45 per cent).

  • 51 per cent of trust-based schemes are not communicating with members over the age of 55 about the new pension rules.

Towers Watson research

Source: Towers Watson

There was always going to be a trade-off between bringing in the reforms and having everything running smoothly straight away, so it’s no wonder employers are now playing catch-up.

Having said that, those that do start to offer more flexible pension schemes will reap the benefits in the long run.

So, why offer drawdown?

  • Flexibility – workforces are diverse. Employers need to be able to meet the different needs and levels of interest across various demographics.

  • Freedom – by offering drawdown options, employers are increasing the freedom of choice for their employees. If managed correctly, the reforms can help to create a better standard of living during retirement because employees can take an income, or choose not to, and can take money out as and when it suits them.

  • Planning ahead – employers can manage the demographics of their workforce more effectively and reduce the risk of having an ageing workforce.

There needs to be an environment that encourages everyone to think about pensions and what could work for them. If this is done long before it is time to retire, it will make the decision a lot easier for the employee.

For the employer, it can provide more clarity on when employees may leave the workforce.

Fiona Matthews is managing director of Towers Watson’s DC mastertrust LifeSight

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