The new age discrimination legislation could force employers to make costly rearrangements to their pension schemes, research has revealed.
Companies with defined contribution schemes that do not permit members to set their own target retirement age could be susceptible to legal claims, the study by Aon Consulting found.
Almost half (45%) of the 170 defined contribution pension schemes assessed by the HR consultancy did not allow members to choose their target retirement age.
Paul Macro, head of defined contribution at Aon Consulting, said: “Under new age discrimination legislation, not allowing scheme members the flexibility to set their own target retirement age could potentially be illegal. Companies need to think more about the impact of how this new legislation will impact on their pension schemes to ensure that they do not fall foul of this new legislation.”
Nine in 10 of the defined contribution schemes were found to offer at least one ‘investment lifestyle’ option – automatic processes that change a member’s investment options depending on their age.
Macro said: “The offering of more than one lifestyle option reflects the growing realisation that one size does not fit all when it comes to pension schemes. Variations around the level of risk that members are willing to take in the growth stage, and the different income options now available apart from buying an annuity, mean that multiple options have to be given.”
