More than two thirds (68 per cent) of firms have failed to review their pension scheme design in the last few years, according to research from Mercer, which has raised concerns over gaps in firms’ oversight of pension schemes for employees.

The report warned that those failing to review their pension scheme design leave themselves open to reputational risk and unnecessary costs, arguing that firms should carry out a review of their schemes to ensure the best outcomes for members.

The report, which contains analysis from its DC MOT reviews of over 360 pension schemes, found that employees are potentially missing out on best value member fees, as 34 per cent of employers have not reviewed member fees within the last three years.

It also warned that failure to review other aspects of schemes, might also mean that employees are missing out on legitimate ways, such as salary sacrifice, to reduce the tax they pay and increase the amount of money they receive.

Given this, Mercer warned that while employers may be meeting minimum legislative requirements, they and their people may be missing out.

However, the research found that simple changes to the way employers approach DC pensions could increase the benefits individuals receive without increasing the cost or work for the employer.

Commenting on the findings, Mercer DC and financial wellness principal, Ken Anderson, said: “Our second annual survey of DC pension schemes reveals a number of key areas where employers can do more to ensure they are achieving best outcomes for members.

“Just as you need to ensure your vehicle is road-worthy every year, firms looking after our savings for retirement should be ensuring their pension schemes are fit for purpose. At a time of an acute cost of living crisis and other financial market volatility, it is concerning some firms have not reviewed their schemes recently.

“The pension market has evolved in recent years, in particular, charges have fallen and support for members has improved. To capitalise on these changes, firms need to proactively seek better value from their scheme rather than just assuming it is working hard on their behalf."

Mercer’s analysis also found that three-quarters (75 per cent) of trustee/governance committees do not fully represent the diversity of their organisation.

Environmental, social and governance (ESG) concerns were also raised, as the report found that while 81 per cent of employers have corporate environmental policies, less than half of their employees (45 per cent) believe the pension scheme is in line with these policies.

“This potential mismatch between a firm’s corporate ESG policies and its pension structure could lead to investments allocated to unsustainable investments, which if discovered could pose a reputational risk to the organisation,” Anderson added.

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