Given the increasing range of annuities and other available options at retirement, independent financial advice may be needed. This can be important for more complex retirement income options, such as phased retirement or income drawdown.
Employers can facilitate this by directing staff to an independent adviser or by subsidising advice. Local Partnerships can be formed with local independent financial advisers and on site visits can be made so staff do not need to lose much time from their workplace.
Staff should also understand how independent advice is paid for – either by an upfront fee or from commission on any products sold. Individuals may baulk at paying a fee themselves, but commission would come out of there pension fund. Although a lot of annuities providers do not take anything from the pension pot to pay the independent financial adviser.
In a contract-based scheme, the provider is responsible for communicating with deferred members. Although an employer may not be legally responsible, it may feel more comfortable if its DC provider takes its responsibilities to deferred members seriously.
Good corporate governance for members approaching retirement rests on employers taking their responsibilities seriously. By communicating and engaging with members, employers can help staff preserve their pension as they near retirement and make the right choices on taking an income.