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Promoting a healthier pension plan all round

Promoting a healthier pension plan all round

Charlotte Gibson, Senior Manager, outlines why it is so important for employers to help their workforce understand the importance of actively engaging in pensions early and throughout their individual savings journey.


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Promoting a healthier pension plan all round

I recently asked a friend what she thought of her current defined contribution (DC) pension arrangement. Her reply - that she unthinkingly pays into her employer’s scheme and assumes it is good as they recommended it - sums up for me the lack of awareness many employees have about their pensions and the options available to them.

People know they need to save for their retirement, but many don’t have the time or understanding to make active decisions. More often than not, they assume – or hope – that their employer has enrolled them into something that’s right for them. The typical employee does not pay much attention to his or her pension until they reach the age of at least 501. Often when they do, they wish they had thought about it sooner.   

A recent survey carried out at a KPMG Rethink Pensions event showed that 82%of employers believe that their employees would save more for retirement if they had a better understanding of pensions. Inadequate pension pots at retirement can be a problem for both employees and employers, as people have less choice about when they are able to retire - sometimes staying in roles they aren’t able or fully committed to do anymore, potentially impacting on succession planning. 

There is always a small proportion of employees who take a more active interest in the pension scheme offered by their employer.  For this population, pensions is an important element of their overall remuneration package and is taken into account when considering both new roles and ongoing employment.  

Whether they take an interest in pensions or not, it is rare to find a member with the level of specialist knowledge to feel comfortable in making active decisions about their pension. Most members want to be told what to do: how much to contribute, where to invest and the most suitable solution at retirement. This is perhaps best illustrated by the fact that 94%3 of DC members in the UK remain in their respective scheme’s default structure. They often assume the default structure is the right choice for them, without actively understanding where it’s investing and what solution it’s targeting at retirement.  

All of this places a greater onus on employers to assess whether their DC schemes are fit for purpose for their workforce in this rapidly changing market. They also need to help their employees understand the importance of actively engaging in pensions early and throughout their individual savings journey. This has already started:

  • The Pensions Regulator is enforcing stronger rules and regulations surrounding the authorisation and governance of all types of DC pension schemes;
  • Regular ‘health-checks’ at employer level have become the norm, with many of our clients assessing key aspects of their DC scheme, including provider proposition, member charges, investment default structures, member engagement, administration/systems and at-retirement flexibilities;
  • There is increased competition at provider level with new players entering the marketplace, new technology, evolving default structures and seemingly daily developments to remain competitive and improve propositions. 

This is clearly just the beginning.  My friend, along with many other employees, may still choose not to actively engage in pensions for a while – but there may be comfort in knowing some work is being done to improve the chances of a good outcome. 

For further information please contact Charlotte Gibson



1Anecdotal evidence collected from carrying out numerous guidance sessions and seminars for pension scheme members.

2 Recent KPMG survey carried out with attendees of KPMG's Rethink Pensions breakfast seminars. 

3Research by the Pensions Policy Institute (PPI) into Group Personal Pensions 

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