Only a quarter of U.K. employers believe the defined contribution plans they offer employees will enable the workers to have a comfortable retirement, according to a Willis Towers Watson annual survey released Sept. 10.
WTW's latest Defined Contribution Pensions and Savings survey covers 112 FTSE 350 companies and 187 other leading U.K. employers. It found DC plan fees have continued to fall, averaging 30 basis points, down from 33 basis points in the 2023 survey and 37 basis points in 2020, the lowest enjoyed by master trusts and large employer plans.
Some 82% of those surveyed say they want to do more with their DC plan than just meet compliance or be like other employers, according to the survey. Furthermore, 51% of U.K. employers want to specifically address retirement adequacy in the next two years, and are reportedly monitoring retirement adequacy as part of their plan design, up from a third in 2015, according to findings.
Feedback showed employers are taking actions to address retirement adequacy, “including enhancing guidance services, improving investment strategies, and analyzing retirement outcomes for different groups,” said Helen Holman, head of DC consulting at WTW. “However, despite these growing concerns, few employers have secured additional funding to improve plan generosity, highlighting the need for better investment efficiency and targeted communication.”
It is believed that many DC plans still have “high legacy charges” for simple equity or fixed-income funds, and these should be reduced, Holman said. She added that these savings could be used to diversify asset classes such as private markets and illiquid assets to “reduce concentration risk and provide strong returns for savers over the long term.”
