Pension scheme governance: Member choices and decisions

Wednesday, 05 December 2018

More people than ever are joining employer sponsored pension schemes. Whilst this is encouraging news, joining by ‘default’ in reality means that employees do not have to make decisions or choices to enable membership.

This is further hampered by the fact that joining your employer’s pension scheme takes place at an often busy and stressful time – at the beginning of your employment – resulting in pension decisions not always receiving the full focus they require.

If this is left to chance, not reviewed and understood early on, we will be left with a very disillusioned generation approaching retirement, facing the reality that they may have to continue working as their retirement funding isn’t sufficient and they don’t have the time to make a significant difference.

The factors that will have the greatest impact on an individual’s retirement fund are determined by the decisions they make; investment, contribution and retirement choices. Someone increasing their contribution in their early twenties is likely to have a far bigger impact on their pension fund than a 0.2% reduction in charges.

If governance is to ensure improved member outcomes then member decisions, as the area with the biggest impact on outcomes, should be considered as part of a governance process.

Scenarios to look out for:

Find out more

Download our ‘Pension scheme governance: achieve good outcomes for your members’ guide to read more.

Author: Iain Chadwick, Consultancy Director