How to support employees with their retirement goals
Discover six ways employers can support employees with their retirement goals, from workplace pensions and financial education to flexible retirement options.
For many employees, retirement can seem a long way off. But with people living and working for longer, and the cost of funding life after work continuing to evolve, preparing for retirement is becoming increasingly important. For employers, providing the right support can improve financial wellbeing, strengthen the value of the employee benefits package and help people feel more confident about their future.
Workplace pensions have made saving for retirement much more accessible. Employers are required to automatically enrol eligible employees and make minimum pension contributions, but simply having a pension scheme in place does not necessarily mean employees understand it or are saving enough.
So, what more can employers do?
Make your pension scheme easy to understand
Pensions can be complicated, and unfamiliar terminology can make it tempting for employees to switch off. Regular, straightforward communication can help turn the workplace pension from something that simply happens in the background into a benefit employees understand and value.
Explain how much the employee and employer are contributing, how tax relief works and what could happen if contributions are increased. If your scheme offers employer matching, make sure employees understand the potential value of taking full advantage of it.
It can also be useful to communicate at relevant moments – for example, when someone joins the company, receives a pay rise or bonus, or reaches a particular stage in their career.
Encourage employees to save more
Auto-enrolment provides an important foundation, but the minimum contribution is unlikely to be enough to fund every employee’s preferred retirement lifestyle.
Employers can encourage greater saving by offering contribution matching, contribution increases linked to pay rises, or other incentives. Salary sacrifice can also be worth highlighting where available, as it can allow employees to exchange part of their salary for an increased pension contribution and, depending on their circumstances, potentially reduce Income Tax and National Insurance.
The important point is to make the benefits clear. Employees are more likely to take action when they understand what an additional contribution could mean for their eventual retirement income.
Offer financial education, not just a pension
Retirement planning is about more than the pension itself. Employees may also have other pension arrangements, savings, investments, mortgages and financial commitments that will influence when and how they can retire.
Providing access to financial education can help employees understand these different elements and make more informed decisions. This could include workshops, webinars, online resources or signposting to impartial guidance from services such as MoneyHelper.
This support does not need to become personal financial advice. The aim is to improve financial confidence and help employees understand the questions they may need to consider.
Help employees understand what retirement might look like
It is difficult to plan for a goal if you do not know what you are aiming for.
Retirement Living Standards can provide a useful starting point by illustrating what different levels of retirement spending might look like. The latest figures estimate that a one-person household needs around £13,900 a year for a minimum lifestyle, £32,700 for a moderate lifestyle and £45,400 for a comfortable lifestyle. For two people, the figures are £22,500, £45,400 and £62,700 respectively.
These aren’t targets that every employee needs to reach, but they can help make an otherwise abstract subject more tangible.
Employers can also encourage employees to use pension calculators and retirement income tools to consider whether their current level of saving is likely to support the lifestyle they want.
Help employees find and understand old pensions
Employees may accumulate several pension pots throughout their working lives. Changing jobs, moving providers and simply losing track of paperwork can make it difficult to understand their overall retirement position.
Employers can encourage employees to locate old pension arrangements and obtain up-to-date information about them. The Government’s Pension Tracing Service can help people find contact details for workplace and personal pension schemes.
Bringing everything together isn’t necessarily the right answer for everyone, but having a clear picture of existing pension savings is an important part of effective retirement planning.
Think about retirement as a transition, not a cliff edge
Retirement does not necessarily have to mean stopping work completely on a particular date.
Some employees may want to reduce their hours, move into a different role or gradually transition into retirement. There is no longer a general default retirement age in the UK, and employees can continue working beyond State Pension Age if they wish.
For employers, offering appropriate flexibility can benefit both sides. It may allow experienced employees to remain in the workplace for longer while giving them greater control over the transition towards retirement.
This can be particularly valuable at a time when many businesses are looking to retain experienced employees and make the most of an ageing workforce.
Supporting employees can benefit everyone
Retirement planning is ultimately an individual responsibility, but employers can play an important role in helping employees make informed decisions.
A good workplace pension is an important starting point. But combining it with effective communication, financial education, practical tools and a more flexible approach to later-life working can make the benefit considerably more valuable.
For employers, supporting retirement goals is also part of creating a stronger overall benefits package. Employees who feel more confident about their financial future may be better placed to focus on the present, while businesses can demonstrate that they value their people at every stage of their working lives.
The next step
If you would like to review how effectively your workplace pension and wider employee benefits support your employees’ retirement goals, Kellands Corporate can help. Contact us to discuss how we can support your business and your employees with workplace pension advice and financial wellbeing.