Flexible approach to pensions and personal savings

Mercer has developed an innovative approach to savings that enables employees to distribute their combined employer and employee pension contributions between their pension plan and a general savings plan.

The approach offers substantial enhancements to the flexibility and value of current pension plans at no extra cost, and has been tested across numerous clients, gaining wide support.

The savings plan accrues with interest in a similar way to a pension plan and, once vested, employees use the assets to invest in savings opportunities that meet their individual financial needs. This can include housing, debt repayment and ISAs, as well as other savings options. Under last year's A-day regulation employees have the opportunity to "catch up" with higher pension contributions once they have met their short or medium-term savings requirements.

HR Directors recognise the benefits of dealing with employees' more immediate savings needs and Finance Directors appreciate the potential financial gains through improved staff attraction and retention.

Tony Pugh, UK head of defined contribution pension services at Mercer, said: "We recognise that employees have competing financial demands and that they place far greater value on employers assisting them with those that are more immediate. Although pension is an extremely important piece in an individual's financial jigsaw, it often moves down the priority list when faced with funding a house purchase or paying off debt."

Mercer's broader savings strategy is offered through a single package and, as such, enhances the ability of employers to provide cost-effective financial education to their employees. Targeted in-house seminars, print and web-based material together with support and advice where appropriate are provided to employees to assist them in making effective decisions whatever the stage of their career.

Mr Pugh commented: "It is essential that financial education is provided to enable employees to make the right personal choices. For many, pensions will still be the right way to go but the savings plan offers the ability to spread savings across other investment opportunities and meet more immediate financial priorities where this is appropriate.

" We believe that employers now have an opportunity to help employees tackle multiple financial challenges, backed with provision of broad-based financial education and assistance to support them in making decisions. Companies will benefit through better engagement with their employees. In turn, employees will have a far greater appreciation of the considerable investment the employer is making on their behalf."