Staff in both defined benefit and defined contribution pension schemes have either a limited understanding of pension freedoms or are confused about what impending changes mean for them.
Since the new pension freedoms in April 2015, over a third of of employers have experienced staff enquiring about transferring from a defined benefit (DB) to a defined contribution (DC) pension scheme to take advantage of these freedoms, according to the latest research from Close Brothers Asset Management (CBAM).
However, the Close Brothers Business Barometer, which questions almost 900 employers across the UK, finds that 50 per cent of employers admit that staff in both DB and DC schemes have either a limited understanding of the pension freedoms, or are confused about what the changes mean for them.
This has caused more employers and pension scheme trustees to consider how they can communicate these changes to their pension scheme members and how they can provide them with suitable guidance and access to financial advice.
Jeanette Makings, Head of Corporate Services at CBAM says the pension freedoms have dramatically changed the way individuals can access their pension savings, and it’s therefore to be expected that more DB members will want to review whether a transfer is suitable for them.
‘However, this is a complex and potentially high risk strategy and it is vital that individuals considering a transfer get professional advice from specialists who are experienced in reviewing pension transfers,’ she adds.
‘It’s also a difficult time for employers and trustees as they grapple with the need to communicate these changes to their members and provide them with access to expert guidance and advice to ensure that their members make informed decisions.’
For the majority of employees, a transfer may not be suitable, so it is important that members are not only also educated on the changes, but also receive that specialist one-to-one pension transfer review, Makings says.