Posted on: Tuesday September 15, 2020
Today is Pension Awareness Day! This is the perfect opportunity to boost engagement with this key benefit across your organisation.
While auto-enrolment has increased the number of people saving into a pension, UK employees still lack education and understanding of what they need in retirement, which means they are not saving enough. Here’s five ways that employers can encourage staff to save for their golden years.
Understanding the stakes
A survey of over-50s workers in the UK reveals a worrying lack of preparedness for retirement, with almost a quarter (22%) or 2.2 million saying they are yet to take pension saving seriously. Even more worryingly, over a third of those surveyed said they were relying on events outside their control like an inheritance (24%) or a lottery win (13%) to afford a comfortable retirement.
As an employer, you are in a key position to help employees improve their understanding and see the benefits of being more proactive with their retirement savings plan. To begin with, focus on basic questions like:
- Do you know how much money you will need in retirement?
- What about how much you already have saved?
- Do you know what kind of income that might provide?
If these make employees realise they have gaps in their knowledge, you can then signpost them towards any further resources they need.
Education, education, education
A central part of any financial wellbeing strategy, education is crucial for helping employees join the dots across all benefits and see how to use these to help with their own financial issues, plans and goals.
With pensions, often people are disengaged because it seems like a long way off or they find the subject too complex. But by using clear, simple language and tailoring your communication medium to different employee demographics, employers can serve as a trusted source of information and advice. This is helpful in clearing up misconceptions; for example, that you can rely on the state pension alone to support your retirement, when in reality it provides only the bare minimum living standard.
Offering to match contributions can incentivise staff to keep saving. It’s also a clear signal that you want to invest in their financial future, and is a good way to broaden the conversation out to financial wellbeing generally. However, be careful to ensure that employees don’t misunderstand and end up paying less, as they may presume what their employer is giving is sufficient.
Auto-escalation, whereby workers are encouraged to put some, or all, of their salary increases into their pension, can also boost retirement funds.
A workplace pension is a significant part of an employee’s benefits package and employers should help their workers to understand the value of this benefit and to encourage continuous engagement.
To this end, it’s important to have a coherent communications strategy which maintains pensions as an active concern in employees’ minds. For example, milestone birthdays or life events are a good opportunity to check that employees have a plan and are making the right level of contributions to achieve their retirement goals. Other prompts could include access to retirement calculators, talks with pension professionals, or newsletters keeping them appraised of changes in laws or company policy.
Looking to the future
As of 2018, all employers had to enrol their staff into a workplace pension scheme, but your obligations shouldn’t stop there. Employees at all levels may lack understanding about their retirement needs, especially given the possibility of events like economic downturns, a house prices crash, or changes to the benefits system.
Whilst it’s positive news that the UK’s life expectancy is now 83.6 for women and 79.9 for men, living longer may mean we risk running out of money in old age, or have to keep working longer than planned in order to afford retirement. Furthermore, the pressure caused by the UK’s ageing population means that the state pension may not exist in its current form by the time today’s workers retire.
No one can predict the future. However, as an employer you can help staff to expect the best, but plan for the worst. Being upfront with them about changing economic conditions will enable them to make the right choices to safeguard their financial future.