It’s clear that many of the recent trends we have seen in corporate pensions are long term: companies transferring risk onto their employees as they shift from defined benefit (DB) to defined contribution (DC) schemes.

Two trends within DC are likely to follow suite as companies minimise costs and maximise value for themselves, their stakeholders and their pension scheme members:  the move from employer trustee boards to contracts between members and pension providers and the move towards ‘bundled’ pension providers, rather than using several different suppliers.

These changes will be driven principally by cost – particularly as directors of finance become the new mandarins of pension provision – and any potential savings made here could be helpful as companies face Personal Accounts in 2012. While much detail remains to be agreed on this huge government initiative, it seems clear that companies who start making changes sooner (namely auto enrolment and auto escalation) could be better placed in four years’ time.

Members will see significant change in the choice of investments their employers offer. At the moment we still broadly see a fairly low risk, low return product offered as a default (and inertia prompts around four in five members to choose this option) supplemented with a wider choice of funds, offering varying degrees of spice.

Two things will happen. More companies will offer a better default fund – better in the sense that it will aim for a higher rate for return and a greater likelihood of helping employees who do not want to choose whether their contributions go towards a more comfortable retirement. These will be multi-asset or diversified growth type vehicles.

Secondly, we will see more widespread adoption of target retirement date funds – which automatically change their underlying assets to help scheme members achieve higher returns at the start and lower risk as the target retirement date approaches.

Finally, one thing we might see is greater recognition by companies with employees in overseas markets that they can provide them with a UK style pension administered from the UK. Historically, few seem to have been aware that this option exists, so perhaps 2008 will see expatriates in places like Afghanistan, Cambodia or Peru receive comparable retirement benefits to domestic colleagues.

As we start 2008, it is a frightening thought that many Britons are not ready for retirement – people start saving too late in life and then don’t put enough away – but finance directors can play a massive part in ensuring they have a workforce motivated for life, safe in the knowledge of a comfortable retirement.

*Julian Webb is executive director of DC business development at Fidelity International.

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