While the last 20 years has seen a seismic shift away from final salary schemes to defined contribution plans, very little else has changed in this time and according to 65% of respondents, the pensions market in the UK is crying out for fresh ideas and innovation.
According to new research conducted by Smarterly, 87% of employers are looking to review their pension provider in the next 12 months. The data also shows that 65% of respondents don’t believe that pension providers are doing enough to offer new and progressive products for an ever-changing workforce, and customer service levels from existing pensions providers have fallen significantly with little incentive to go above and beyond what is required.
Steve Watson, head of proposition of Smarterly, said:
“Pension legislation has changed dramatically in recent years, which combined with financial pressures has seen a move away from defined benefit schemes to defined contributions schemes. But the products themselves have remained the same and there is very little innovation the market.
“With employers now legally obliged to enrol their employees into a pension scheme, existing providers are under very little pressure to innovate. They still seek to compete on cost, of course, but with a captive audience, providers see no need to design ground-breaking products or offer outstanding levels of service – they know that there is ample business out there to share around.”
Given these difficulties, it’s not surprising to find that the vast number of employers are looking to review their current pension provider in the very near future – with more than half (54.4%) planning to carry out a review in the next six months. But these employers are likely to be disappointed when they go back to the market. If their current schemes are failing young employees and higher earners alike, they are unlikely to find anything radically different on the shelves.
“Employers are unhappy about the current status quo in the pensions market. Legacy providers are simply not doing enough to keep up with the new generation. The time is nigh for a new player in the market.”
The research takes into consideration the views from 250 HR professionals working in businesses with a workforce of 300+ employees.