Most employers provide a defined contribution (DC) scheme to ensure the employer competes in the market, rather than ensure their employees have an adequate income retirement, Towers Watson has revealed.

According to the actuaries' DC pension strategy survey, 65% of UK employers surveyed said market competitive provision was the main objective to offer a DC pension, while only 15% said their objective is to ensure their workers save for an adequate retirement income.

Even so, 42% of employers said their DC plan is currently helping employees to retire, and a quarter believe their plan currently ensures their employees have an adequate income in retirement.

Towers Watson senior DC consultant Will Aitken, said: "At the current time, many employers have focused on what goes into DC – market competitive contributions, rather than what comes out – adequate pensions.

"The underlying message seems to be that that, like mortgages, employees need to take ownership of their own finances. Of course, the question is whether employees see it the same way."

The survey also revealed that while 86% of employers felt that defined benefit (DB) helps retain employees and 80% believe DB ensure employees have adequate retirement income, those figures fell to just 22% in both cases.

Aitken said: "Employers need to decide what they want their DC scheme to be, beyond not being DB.

"Up till now, DC has done a great job of not being DB and can no doubt continue to do so. But given the huge sums of money entering DC schemes, we're seeing a desire to do better than 'not DB'."

Towers Watson said that despite only a small number of employers setting the objective for their DC pensions to provide an adequate retirement income, almost three-quarters believe it is the role of the employer to offer services to help their employees as they reach retirement, while 79% believe employers should ensure their DC plan is tailored to meet their employees' needs.

Additionally more than half of employers are not worried about being stuck with staff that are not able to retire as 58% of employers said their typical employee would still be able at the age of 65. Around a third said it is more than likely their workers can retire between 66 and 70.

First published 04.03.2014

monique_simpson@wilmingotn.co.uk