She predicts no-one will have the full range of options in place for April, as it’s still unclear what the government’s guidance service, Pension Wise, will look like and there’s still legislation to be passed. “It’s horribly complicated and not something you can design a scheme for instantly,” she adds.
Here is what the experts say employers should be doing now:
Check the details
“Employers must look at their pensions scheme and understand how the changes impact it,” says Linklaters managing associate Jacqueline Reid. “You have to bring in opportunities for people to take flexible benefits. It is a trustee decision, but in practice trustees want to do it in conjunction with employers.”
Partner with providers
Reid advises looking at different providers to partner with to ensure employees are able to access the freedoms if they wish to. “Can you send employees to another provider and help them transfer their pensions out,” she says. “You need to provide options even if you don’t want to offer them yourself. There’s a growing number of people who don’t want to offer DC flexibility but who don’t want to wash their hands of it. Be helpful and push people towards providers who can help.”
Work on your lines
Wealth at Work director Jonathan Watts-Lay predicts employers will receive calls on 6 April from people who want to take their money out. “What are you going to say?” he asks. “You can’t say: ‘I don’t know’.” “It’s all about communication and helping people weave their way through the complexity,” says Reid.
Education and more education
“Employers need to recognise that people are going to need a lot more help,” says Towers Watson senior consultant Will Aitken. “[Government] guidance is not enough.” This means financial education comes to the fore, as Ros Altmann says: “The best way to impart financial education is via the workplace.”
“Pensions education is not fit for purpose anymore because pensions have changed,” adds Darren Laverty, a partner at Secondsight, explaining that while financial advice is expensive, financial education doesn’t have to be. “Workplace financial education is about empowering employees to make their own financial decisions with their newfound knowledge,” he says.
Rethink your pensions strategy
Watts-Lay believes the new rules are a “commercial imperative” for employers to think differently about their pensions strategy. “There are big strategic issues, around areas such as managing risk and liabilities and managing an ageing workforce,” he adds. With many employers trying to manage the risk of their final salary pension schemes, for example, the news that savvy savers may choose to switch and cash in will be “music to the ears of a lot of companies”.
Now could be a good time to have a strategic rethink about pensions and retirement in your business.