06 Apr Employers and their retirement support
New research from Reed shows that employees value their pension benefits very higly. Their survey also showed that 55% of employees who took part said that “a workplace pension that will provide them with a comfortable retirement income” was a key reason to stay with their current employer.
Providing for a comfortable retirement income
Other than a ‘Final Salary’ pension scheme aka ‘Defined Benefit’ pension scheme, which have rapidly declined in recent years, there are only a few pension schemes that could claim to provide “a comfortable retirement income”. Given that many employees remain on the minimum contributions and their low engagement with pensions generally, it’s very unlikely your employees are saving enough for their retirement.
You may provide your employees with the potential, but just providing the benefit is not going to help them achieve a comfortable income in retirement.
Auto-Enrolment is only a start
It’s not enough to automatically-enrol your employees and think that the job is done. Employers may even send out a few regular communications about the pension benefit that they offer, but this is not going to help them achieve the “comfortable retirement” they want and deserve?
Employees need to understand that saving the minimum contribution is not going to achieve the retirement savings they need to retire at 55, or even 65. It’s important they understand that there are also other considerations. They need to consider their investment fund choice and the risk profile and the date they want to retire. Planning their finances for retirement needs to be part of a larger picture of managing their finances throughout their working life. For example, if an individual has debts they need to pay off, it’s likely to be best to pay their debts off first before starting to save for their retirement, because interest that grows on debts can often be much higher than the interest earned on savings.
What can you their employer do?
It’s important to encourage employees to save as much as they can afford as soon as possible, taking all their financial circumstances into account. It should be the mind-set of every employee to set aside what they can afford every month into their pension to prepare for their future. The longer employee leave it or the more they put it off, the harder it will be to catch up later. A better understanding of what they need and what would help them achieve a “comfortable retirement” can be achieved by employers using an independent financial adviser to speak to their employees and pointing out a few basic facts and figures to change their mind-set.
Education and understanding the options available is the minimum an employer can do to support their employees to plan for their retirement. Helping employees get on the right track early in their careers benefits them throughout life, not just at retirement. Supporting employees with their finances is beneficial for your business too because you will have a happier more production workforce.
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