New Aon survey says DC schemes struggle to measure up

18 February 2020

AON publishes in a press release:

“LONDON (18 February 2020) – Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has published ‘How do you measure up? UK Defined Contribution Pension Survey 2020’. This new survey of over 200 UK defined contribution (DC) schemes, covering more than half a million members and £50 billion in assets, shows that schemes are struggling to find the right form of measurement to assess the effectiveness of various key aspects of their DC schemes.

The survey found that respondents want to offer competitive, ‘good value’ DC schemes – with most wanting to do more than the minimum level required – but many are not measuring whether they are succeeding in meeting their objectives.

Key findings include:

• More schemes aim to benchmark contribution rates against peers (other schemes) than aim to deliver sufficient funds for employees to retire
• One in three schemes do not measure progress against their objectives
• 65% of respondents do not know the projected outcome for a typical pension scheme member
• Just 25% of employers consider pension outcomes in the context of future workforce planning
• One in three trust-based and one in five contract-based schemes plan to move to a master trust structure in the next five years
• 65% of respondents said they would like to spend more time communicating with employees on pensions

John Foster, principal consultant at Aon, said: “While it’s right that there has been a strong focus on what is being paid into DC schemes, it’s vital that the focus is not just on the short term but just as strong on what the outcome will be. We have been actively helping sponsors and trustees of DC schemes to set objectives aligned to individual member needs as well as meeting the employer’s strategic goals.

“It is key to then make sure that there are robust measures in place to be able to check progress against these objectives and to identify where resources can be best focused. However, at present we feel that the measurement process is rather hit and miss and doesn’t actively demonstrate value.”

One clear message coming through the survey was around the trend for schemes to delegate in different forms. While over a third of schemes do not delegate any investment decision-making responsibility to a third-party investment professional, one in six trust-based schemes expect to delegate more over the next three years.

However, reflecting the trend shown in Aon’s 2017 DC survey, and following master trust authorisation last year, we continue to see a trend to increase delegation, with more schemes likely to move to a master trust structure in the next five years

Go to the website of: AON