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Pensions compliance ‘crowding out’ other retirement objectives

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Organisations are neglecting more strategic retirement objectives as they struggle to keep pace with changing pensions legislation, according to research by Towers Watson.

Towers Watson's Fit for Retirement report found that 56% of organisations surveyed said compliance was one of their top defined contribution (DC) pensions priorities.

Compliance scored significantly higher than helping employees to retire (38%), competitiveness (31%) and attraction and retention (30%) as drivers of pensions provision.

Head of Towers Watson’s Fit Age programme Phil Percival said that compliance is “crowding out employers’ ability to focus on retirement adequacy”.

Recent changes to pensions legislation include April’s pensions freedoms, which allow savers to draw down some or all of their money before retirement, the introduction of auto-enrolment and reductions in the annual and lifetime allowances.

“Such a flurry of change is preventing companies from focusing on the real reason for providing pension plans – either for the employer, in terms of attraction and retention, or for the employee in terms of their ability to retire,” Percival added.

In the US, where pensions regulations have been more stable, Towers Watson found a different story, with compliance at the bottom of the list of priorities for employers (20%). US employers ranked employees’ ability to retire and competitiveness higher, at 29% each respectively.

Percival said the UK’s ageing workforce means that businesses must think more carefully about workforce planning, benefit costs and succession planning.

“With the number of people in employment aged over 65 already doubling in the last 10 years, employers need to make sure that they understand the financial situation of their workforce, in order to gauge the extent to which workers will be able to retire,” he said.

“With this understanding they can start to help employees more effectively plan for retirement at a time of their choosing, as well as planning their own workforce requirements in the near future.”