Do employers have a duty of care to their staff when they retire?


If you take the Daily Express, you will have been reading a series of front page headlines about “rip-off pensions”. Here’s this Thursday’s edition .

The argument is based on some recently released figures

“A 65-year-old with average pension savings of £24,000, and in good health, can get £1,099 a year from Reliance Mutual but just £839 with ­taxpayer-backed Scottish Widows.

But someone who has smoked for more than a decade could receive £1,700 a year from Reliance because their life expectancy is likely to be shorter.”

These are not the Express’ figures, these are the ABI’s.The Association of British Insurer’s has finally woken up to the reputational damage that could be done to the British Insurance industry and are prepared to go so far as naming their own members to highlight the extent of the problem! Good for them.

This is the problem.

The people who buy the £839 annuity are taking a 30% lifetime pay cut! If they are heavy smokers they are taking nearly 50% wage cut -for the rest of their lives.

And I know that people will be using that Scottish Widows rate, not because they want to be poor for the rest of their lives, but because they know no better. It is no use arguing that they should have been taught about this in school. These people left school in the 1960s. The people leaving school today wont be considering these decisions for forty years (by which time we might have started looking at better ways of using retirement savings than individual guaranteed annuities but that’s another story). School is not the place to learn about annuity rates. That should be happening in the workplace.

These people could be retiring from your firm and it is happening on your watch. If you are a trustee or pension manager or take any kind of fiduciary responsibility for the retirement welfare of your staff, you should be concerned.

If you have an ageing workforce and you see a drop in productivity unless your senior staff retire, this should concern you.

Whatever value you can add from DC scheme design may be being frittered away because of poor “at retirement decision making”.

What is more, it affects all staff, not just those in your pension scheme(s).

If you are reading this and know of people in your workplace who are reaching retirement age, you should be asking, “what are we doing to make sure they do not take the wrong decisions?”.

It costs a company nothing to approach firms specialising in annuity broking. If you look no further, google “Annuity Direct” right now. The firm’s owned by my friend Alan Higham and you will get a fair deal. Martin Lewis also recommends Alan as do Fidelity and a whole bunch of occupational pension schemes.

There are others out there and they have capacity.

My point is that there is a moral obligation on employers not to care for their staff’s welfare. It’s common decency. There will come a time when people will ask you “why didn’t you protect your staff from this kind of thing?” and answers such as “we didn’t realise, we didn’t know what to do and we couldn’t afford it” will not wash.

It costs nothing to make your staff aware of a service that they will be paying for, these services are readily available and your staff read the Daily Express even if you don’t. Of course you can pick up part or all of the advisory tab but you don’t have to- what’s important is that you push the need to get help. You certainly wouldn’t encourage your staff to be investing five or six figure sums in housing or the stockmarket without assistance.

I’d like to see the KPIs of those who manage the organisation’s “Human Resource” being extended to ensure that all staff retiring (not just those in the pension scheme). get access to sound advice at retirement. This seems a much cheaper and effective way of boosting pensions than upping contributions to existing pension schemes or even setting a scheme up in the first place.

The pension scheme is only a means to an end – decent post retirement incomes. Consequently, protecting staff from bad decision making on their retirement savings should simply be an extension of your company’s pension policy.

I’d be interested to hear the views of anyone who considers they have fiduciary obligations and whether they extend to ensuring staff get help avoiding the issues mentioned by the Daily Express.

I’m not arguing for a change in the law, I’m arguing for a change in employment practice. Work is boring, pensions are boring they have a natural synergy. People won’t engage with something so boring as annuity purchase until they have to, but if they retire and don’t engage they can end up being ripped off. The time to deal with these things is in the lead up to retirement and as an employer you are “on duty”.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to Do employers have a duty of care to their staff when they retire?

  1. Gerry Flynn says:


    Back in the early 80s I worked for a large contruction company in their pensions dept, we used to trawl through the market place to find the best deal for the employees who were retiring to purchase a CPA,(Compulsary Purchase Annuity for those of you from a later life in pensions). Today you have the OMO as its replacement, which is born out of the mantra/dogma that we have to stand on our own two feet and that risk now has to be equally shared, so basically tough on you if you get it wrong when buying a pension.

    • henry tapper says:

      It is every man for himself and I’ve yet to see any legal battles between members and trustess, regulators and trustess of any perm of the above against the employer. “duty of care” is pretty ill-defined but I’d say that most people would attach it to “trustees” as a requirement to look after the member’s best interests- which isn’t quite every man for himself- does this extend to GPPs (which do have a trustee)? Your guess is as good as mine

  2. TPR Principle 6 says it all: “communication to members is designed and delivered to members to encourage member engagement so that they are able to make informed decisions about their retirement savings.”

  3. henry tapper says:

    I have to agree with you Alistair, the onus is ultimately on the member though I see a point where disgruntled membes may take American style class actions against trustees who didn’t communicate at all!

  4. Claire Connelly says:

    Most definitely! Pensions are a minefield – we offer occupational schemes & provide information to employees on their options & then suggest they seek financial advice if they feel they cannot make a fully informed decision. We are not IFAs so cannot provide advice but find that employees appreciate having the different options explained.

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