More than one in four workers are either concerned about their company
pension scheme’s performance or have been discouraged from joining because of poor performance, according to new research from MetLife Europe Limited.
The ongoing squeeze on company pension funds and payouts from falling annuity rates and stock market volatility has left 20 per cent of members disappointed with their defined contribution scheme’s performance and 6 per cent put off joining because of concerns about payouts.
However the introduction of
investment guarantees so that pension investments did not lose value would boost membership and reassure existing scheme members, the research shows.
Up to 18 per cent of potential members would be encouraged to join their company scheme if a guarantee was in place while another 44 per cent would be reassured about their investment. Around 23 per cent of workers aged 18-24 would be encouraged to join, the research shows.
The research shows around 16 per cent of workers do not have access to a company pension scheme through their employer and that another 8 per cent are not interested in joining their company’s scheme.
Workers in the Midlands are most likely to have been discouraged by the global financial crisis from joining a company scheme – 14 per cent of them have been put off compared with the national average of 6 per cent.
However, previous research undertaken by MetLife and included in Planning for Retirement: You’re on Your Own by Dr Ros Altmann, shows around 40 per cent of company pension scheme members are happy with the performance of their scheme rising to 58 per cent for those workers aged 35 to 44.
However, this research showed that pension payouts have fallen sharply over the last two years. Calculations show a 60-year-old investing 10 per cent of their £25,000 salary into a defined contribution scheme has seen the projected payout at 65 drop from £17,000 in September 2007 to around £11,000 now.
“It’s particularly worrying to find that the global financial crisis has hit confidence in company pension schemes and in many cases is discouraging people from joining and taking advantage of the tax relief available,” said Dominic Grinstead, managing director of MetLife Europe Limited.
“Investment guarantees have proved successful for personal pensions and could provide reassurance for defined contribution pension scheme members now that final salary schemes are being phased out. It is a subject that should be debated and MetLife would be keen to address the issue.”
