Defined Contribution (DC) is and will continue to be the predominant form of pension provision in the UK from here on.
DC will play a vital role in helping workers achieve a desirable and sustainable lifestyle in retirement though DC outcomes are wholly contingent on the level of contributions from the employee and employer and the return on this investment. However, as current contribution rates and accumulated pension savings are woefully inadequate, early stage employee engagement with their pension is essential.
Following the pension freedoms announced in last year’s Budget, retirees are now faced with a much wider range of options, making DC pension arrangements much more attractive to employees. However, there are risks – not only the risk to the DC retiree’s capital and its ability to generate sufficient growth and/or income but also longevity risk, given that most people underestimate their life expectancy. The impact of inflation, tax implications and passing on wealth are further considerations.
Employers are tasked with implementing auto-enrolment and appropriate pension provision for their employees, accompanied by a degree of governance over the scheme and their outsourced providers. There is an amount of administration required by companies to adhere to the legislation and this has been costly in terms of time and resource for many employers to date. However, this may lead to pensions having a more important role in the way in which employees view their remuneration. This aspect of employee reward may in turn influence a company’s ability to retain and attract talent. It is also in the interests of companies that their employees are able to retire at an appropriate age.
Columbia Threadneedle Investments is a provider of retirement investment solutions, designed to provide members with actively managed strategies that diversify their investments across a wide range of asset classes, so as to provide superior risk-adjusted returns over the longer-term. Our ultimate aim is to help members achieve a standard of living in retirement to match their expectations.
To discuss Multi Asset Solutions in more detail please email Andrew.Brown@columbiathreadneedle.com
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