A fifth of employers are missing out on tax savings by not using salary sacrifice, and many of those that are doing so are not using it effectively, according to research from Mercer.
The financial service firm’s study also found that 34% of defined contribution (DC) schemes do not offer member access to all retirement options, while more than 80% don’t facilitate advice or guidance.
The research, covering more than 300 employers with 3 million-plus UK savers, discovered that more than half of employers have not reviewed the charges paid by themselves or staff in the past two years, while two-thirds have not reviewed their contribution or broader benefit design in the last three years.
The scheme survey found 87% of employers are not completely confident they would pass The Pensions Regulator’s auto-enrolment spot-check, while 52% do not know if their DC plan reflects the employer’s environmental, social, and corporate governance (ESG) beliefs.
Employers are also failing to monitor the performance of their DC pension default strategy, with 57% not having reviewed their default in the past 12 months and 25% having failed to do so in the past three years.
Ken Anderson, principal, DC MOT lead at Mercer, said: “Our analysis indicates that many schemes have plenty to do just to get up to date with where the market is now. Not doing so risks damage to their reputation, corporate goals and, importantly, the retirement outcomes of scheme’s members.
“This report shows that even when schemes appear to be working well, risks may be lurking beneath the surface. In challenging times, schemes can seize opportunities to reduce costs for both themselves and their members and provide them with the support they need now more than ever. Financial wellbeing, engagement and productivity go hand in hand. Schemes must talk to their people to help them make the right decisions now and in the future — and to remind them of the value of the benefits they provide.”
