Most pension schemes believe that the guidance guarantee that was announced in Budget 2014 will not provide adequate support for defined contribution (DC) members ahead of retirement, research by Mercer has revealed.

According to Mercer's survey of more than 300 employers and trustees, only 62% of schemes surveyed said that the guidance guarantee will be enough to support members.

Only 38% plan to simply facilitate access to the free independent guidance, while 62% will offer additional support, although how they intend to deliver this will vary by scheme.

Mercer UK DC & savings product leader Roger Breeden said: "Receiving generic guidance provided shortly before retirement will be useful, however, for most DC savers it will be too late. To increase their chances of getting a decent pension individuals need to make their investment and contribution choices at a much earlier stage.

"Trustees and employers need to review their communications and support to ensure employees get a full picture of the options available to them and the consequences of these early decisions. Once the changes announced in the Budget are fully defined they also need to check that all communications material meet the new requirements."

Of the schemes surveyed, 76% said they expected less than 20% to transfer out and only 16% expected more than 40% to do so, when asked whether they expected many transfers from defined benefit (DB) to DC schemes.

Breeden said: "Our experience suggests that the actual number of transfers from DB to DC would be around 30%, so not dissimilar to what our participants expect.

"Such transfers, especially in great numbers, could have an impact on asset liquidity, administration processes and the employer covenant, so regular monitoring and building it into risk management programmes is essential."

First published 14.08.2014

monique_simpson@wilmington.co.uk