The experts at Wealth Wizards provide their top advice on what you can do to help your employees plan for retirement.
With the huge changes that have affected workplace pensions over recent times, it has never been more important for employers to understand how they can best help their employees to engage with their pension and retirement plans.
Since the abolition of the default retirement age (DRA) in 2011, the introduction of auto-enrolment in 2012, and the recent pension reforms providing unprecedented flexibility in retirement more employees than ever are now facing important decisions that will affect their retirement, like how to invest their pension and how and when to start taking benefits.
On the positive side, employees are enjoying increased choice and freedoms in how pension savings are used and accessed, yet on the other hand, many are struggling to understand their investments options and to make informed, proactive choices for their future security.
And, as the majority of businesses are no longer setting a compulsory retirement age for their employees, a distinct lack of advice and support in the workplace is seeing older employees delay their retirement planning altogether.
According to results of the Chartered Institute of Payroll Professional’s (CIPP) annual survey released in September 2015, Great Britain is heading towards a pensions ‘ticking time bomb’.
The survey concluded that British workers across all age groups are failing to adequately plan for retirement, with 30% unsure if their pension pot will be enough to live on. Alarmingly, 36% of those aged 51-60 admitted they had no pension provision at all.
With the average UK pension pot coming it at less than £40,000 and the life expectancy beyond typical retirement age increasing from 16 years in 1990 to 20 years in 2015, it has never been more critical for employees to get help with their retirement planning
Issues arise for those with larger pots too. Long serving senior employees may find that the Life Time Allowance changes may have future implications.
Here are some tips for supporting your employees with their pension and retirement:
Be positive and encouraging
Research shows that a workplace pension where the employer contributes is viewed as the top employee benefit. Driving engagement with the pension scheme can in turn drive employee motivation, retention and satisfaction.
So consider how you can best promote the benefits available and build awareness.
For example, create clear internal communications that set out the benefits of the pension scheme and encourage employees that it’s never too late, or too early, to begin planning for the future.
Listen to your employees concerns
Even with clear communications, employees may still have real concerns. Attempt to understand what these are.
Create an environment of trust, where staff members feel able to be open and honest about any issues they have with pensions and retirement.
It’s worth remembering that retirement means different things to different people. For those nearer to retirement there could be different emotional reactions. To some it will mean freedom to indulge hobbies, spend time with family and travel. Yet for those who lack the confidence and awareness, just thinking about impending retirement will be overwhelming, while for others there may be the very real fear of a reduction in standard of living.
For those a longer way from retirement they could be a lack of interest or feeling that it really matters to them.
And for all employees the choices they need to make regarding their pension – how to invest, how much to contribute, and when to retire – can be intimidating for those that are not financially literate.
Understand if your employees feel they have access to the information and help they need, and if not, where the gaps are.
Provide help and support to address their concerns
Your pension provider may well be able to provide you with material to use for staff communications, and even gives access to education or online tools.
For those approaching retirement, there is also the guidance provided by Pension Wise, TPAS and Citizens advice. This is a good way of getting a clear picture of the types of choices that can be made and what they mean, although they do not give personal recommendations on actual products or solutions.
Expert advice leading to personal recommendations is for many the most desirable form of support. However, now that advisers charge explicit fees for their services – and average fees for basic pension advice services have risen by circa 16% since April 2015 – this option can be perceived as expensive and only viable for select senior staff if at all.
One option to consider for bringing expert affordable advice to all staff is to engage an online advice service.
So called ‘Robo-advisers’ allow employees to access online services either in the workplace or at home. These are commonplace in the US and are growing rapidly in the UK. One example in the UK is Wealth Wizards, offering fully regulated independent advice via online apps, which are designed by experienced chartered financial planners and investment experts. These apps deliver personalised recommendations online, and are supported by telephone help and access to a chartered financial planner if needed.
Providing the right support for pensions in an inclusive way will deliver significant benefits for the employees and employer alike.