HR leaders understand the worry this may be causing. Indeed, many have seen people pausing pension payments in response.
Research from Penfoldi showed nearly a third of savers halted contributions to their company scheme in March to July. This trend is set to continue as economic prospects appear far from rosy.
The danger of pension poverty:
Unfortunately, very few employers can afford the scale of pay rises needed to soften the financial woes workers across the generations are facing. HR teams will need to go above and beyond to support people in the best way they can.
Older workers and those approaching retirement are particularly vulnerable. They will want to know if they have enough in their pension to retire or whether rising interest rates and inflation will destroy their savings.
What can HR do and how can they best support their workforce through this difficult period?
Offering financial education tailored to different age groups at different financial stages in their life is a logical starting point.
Workshops covering issues such as debt management and borrowing, budgeting, and keeping track of saving and investments can help people become more financially confident and help them to tackle more pressing issues.
Retirement planning tools help people picture their retirement and its relationship to their pensions, helping them to see the advantages of contributing to their scheme when they can afford to do so. According to Penfold, if a 20-year-old paying £200 per month stops doing so for just three years, the impact could be a 10% fall in their final pension.
Helping younger colleagues find ways to budget so they can continue contributing into their pension will be a huge benefit in the future which they may not realise now. As they are just starting out, they may not be aware that their employer pays in too, as well as the government, in the shape of tax relief. Reminding them of this reality is an effective nudge to make them hesitate about pausing payments.
While higher interest rates are not great news if you have a mortgage or credit cards, if you’re nearing retirement, the headlines are better. Canada Life showed that average annuity rates have reached a 14-year high, rising by 52% over the past nine months.
Annuities, or a guaranteed income for life you buy with your pension, is a key feature of Pension Potential. Free to employers, it lets your people work out what their pot would buy by comparing every annuity across the market and takes them through what retirement could look like for them. There’s also the option to talk to someone about the choices that lie ahead.
We’re now in an era when every penny counts. We’ve thought deeply about this from a savings perspective and National Pension Tracing Day is the result.
We launched last year, and many companies made their people aware that they could be among the 1.6 million or so who have mislaid or overlooked pensions worth £19 billion.
Employers can use a free communications toolkit to help staff check their own pensions. This could mean a windfall that people weren’t expecting but which couldn’t come at a better time for those pondering what life after work will hold.
Steve Butler is CEO at Punter Southall Aspire