Pension action needed to avoid panic
06 April 2004
Employees need to be told about changes to pension rules - or panic for the future could set in.
Mercer Human Resources is warning firms to prepare their employees for the rule changes now, as a new system could result in employees thinking they have less than last year.
Until now pension statements have simply displayed the current value of the member's fund. But new rules mean employees will be shown the possible total amount the employee could receive upon retirement.
The new number allows for inflation and is directly comparable to today's prices. This means the sum could be less than expected.
"The clock is ticking for companies to take action and explain the context and rationale behind the statements," said a European partner at Mercer, Nick Throp. "If staff are not warned about what to expect they may panic when the illustrations arrive."
Mr Throp continued: "Companies that have issued the new statements and explained their meaning already will be in a good position when the legislation takes effect. The key is to engage the workforce now; explain what the illustrations mean, and why the new amounts may appear lower than last year's."
The new figures are known as "Statutory Money Purchase Illustrations" and will also be provided for those on occupational purchase schemes, personal pensions, and stakeholder pensions.