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UK - January 30, 2009 - Fewer than one in five employers believe they are currently getting full value from the money they spend on employees' pensions, according to a survey conducted by consultants Watson Wyatt.

The Watson Wyatt research report, The future of UK retirement savings, involved canvassing the views of over 70 large UK private sector employers as well as 2000 employees of large UK private sector organisations.

Only 18 per cent of employers said they felt they currently got full value from their pension benefit spend. This low proportion may stem from the poor understanding that employers perceive their staff have of pensions; only 27 per cent of employers surveyed were able to say that they were happy that their employees understood the pension benefits they offered.

"Many employers need to rethink their employee benefits strategy and retirement deal in particular," said Gary Smith, a senior consultant at Watson Wyatt. "In the current economic climate no company can afford to achieve a sub-optimal level of return on such a significant investment. It is unlikely that companies are going to be in a position to increase their overall benefit spend at present, so they should be focussing on making their current spend work harder. In many cases, this could be largely about raising awareness and understanding of the benefits on offer, but employers should also focus on better aligning the benefits they offer with what their employees actually want, need and value."

A majority of employers are also concerned that their staff are not saving enough for their retirement. The Watson Wyatt research found that 58 per cent of large employers are concerned that their employees are not saving enough for their retirement.

"This may be in part due to a lack of understanding by employees and indeed, some employees are not really helping themselves," said Gary Smith. "Many employers have switched new staff - and increasingly existing staff - out of defined benefit pension plans into defined contribution plans. Whether through inertia or positive choice, employees appear less inclined to join DC schemes and when they do so, many do not take full advantage of the employer matching contributions on offer."

The survey found that employer-sponsored pensions and personal pensions remain the most important sources of retirement income for the majority of employees, with 68 per cent of employees saying they will be either very or extremely important to their income in retirement. Some 53 per cent cited 'other savings' as being very or extremely important, 49 per cent property, 33 per cent state benefits and 23 per cent inheritance. One in five (20 per cent) said that continuing to work after retirement was going to be a very or extremely important source of income after retiring.

Older workers are more likely to rely on the state and pensions, while younger workers are more likely to rely on non-pensions savings, property, inheritance and continued earnings.

Bruce Wraight
Head of Public Relations, Europe
Watson Wyatt
+44 (0) 1737 273370
+44 (0) 7771 765154
bruce.wraight@watsonwyatt.com 

Visit Watson Wyatt's online press office: www.watsonwyatt.com/europe/news/journalists

Watson Wyatt Worldwide

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the world's leading organizations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,700 associates in 32 countries and is located on the web at www.watsonwyatt.com.