Employers do not review performance of staff pensions

One quarter of small to medium size (SME) employers (25 per cent) do not regularly review the performance of those investments in which they have invested their staff's pensions to check they are performing well.

This is despite the majority (83 per cent) of SME employers agreeing that pensions are a responsibility that companies should take to help secure their employees' futures.

The findings from Barclays Financial Planning follow recent research that one in ten SME employers do not offer their staff a company pension scheme. Moreover, nearly a third of employers (32 per cent) might be running pension schemes that expose them to financial risk or high costs.

Of those offering a company pension scheme, just 11 per cent now offer a final salary scheme open to all staff, while five per cent have closed their schemes to new staff. Just 12 per cent offer a stakeholder scheme to staff, which is often the most appropriate scheme for many staff of SME businesses. Final salary schemes, while attractive to members, carry significant financial risk for the SME businesses. On the other hand, trust based defined contribution scheme often cost more to operate and take up more management time due the additional responsibilities placed on employers.

Of the other types of pension schemes used by SME employers include:

16 per cent - trust based defined contribution schemes, held in trust where trustees manage the assets
52 per cent - contract based defined contribution schemes, with individual personal pensions held in employees own names
12 per cent - stakeholder schemes
Two per cent - money purchase
8 per cent - none
Five per cent - other

Moreover, many employees are kept in the dark as only just over half SME employers (52 per cent) say that they regularly update staff as to how their pension is doing. The majority of companies communicate to staff the benefits of their pension scheme via their contract or offer letter (67 per cent) at the start of their employment. Far fewer employers take a truly proactive approach using further methods of communication such as intranet (19 per cent) or face to face meetings (49 per cent).

Other means of updating staff include:

53 per cent produce pension scheme booklets
54 per cent rely on financial advisers
58 per cent use a staff handbook to communicate to staff about their pension scheme

The findings form part of an ongoing study by Barclays Financial Planning into the attitudes and awareness of the people responsible for employee benefits in small to medium sized companies. The survey was conducted by Mori amongst 200 companies with a turnover of £1m to £15m.

Stephen Ingledew, Director of Barclays Financial Planning comments, "It is surprising that in addition to a number of small and medium sized companies not offering pension schemes to their employees, a quarter of those that do are not monitoring the performance of their employees' investments or informing them regularly of the progress of their pensions . By improving monitoring and communication, staff would have a much better idea of where they stood and this might encourage them to contribute to the pension themselves, to help secure a comfortable retirement."