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Pensions questions your employees will definitely ask

All businesses should be doing more to encourage people to talk openly about retirement plans

There has been significant change to pension legislation in recent years, so the topic of long-term savings has continued to dominate the media. Our own research recently revealed that one in five Brits expect to retire after their 70th birthday. It’s no surprise then that employees are reacting by placing pensions much higher on their agenda than ever before.

Further research from LifeSight found that three-quarters of employees think people should talk about pensions and retirement planning more, and nearly half are relying on their employer to keep them informed.

Encouraging people to talk openly about their retirement savings is something all businesses should be doing more, and HR teams play a vital role. Preparing for any questions that staff may have around pensions is extremely important.

Questions employees are likely to ask will vary depending on individual circumstances and what schemes your company has in place. However, our research found that the majority of UK employees would like to know the following:

  • How much should I be contributing?

Optimum contribution levels will vary for each individual depending on the level of matching contributions available and their aspirations for retirement, so it’s important to have a clear understanding of what employees’ options and affordability levels are in terms of contributions – whether they can scale up, or down, as required.

  • How should my money be invested?

Half of people (49%) in an occupational pension scheme have reviewed their investments in the last year. For companies with defined contribution schemes it is essential that the governance model in place is fit for purpose, in particular regarding the choice of a default investment option. For members with a greater understanding of investments, clarity on their risk appetite, and an idea of how they will spend their money in retirement (e.g. taking an annuity or through drawdown) it is important to ensure that the range of investment choices offered is capable of meeting their needs.

  • When can I retire?

From 2020 both men's and women's state pension age will be 66, and will continue to increase. Outside of state pensions, employers are growing concerned that older workers are deferring retirement because of inadequate retirement savings. It is important to engage employees on how on track they are with their savings. Providing staff with information to make informed decisions on their retirement also benefits employers in terms of workforce planning.

  • How will I access my income once retired? ­

Nearly two-thirds (62%) of individuals don’t know how the pension freedoms will affect them. It’s therefore vital that you start engaging with employees on the matter early, so your workforce feels in control of their retirement and can make informed decisions when the time is right.

  • What are my options around drawdown?

More than a third of employees said they have a good level of understanding of the changes to pensions in 2015, yet 42% have done nothing as a result. Communicate to workers how drawdown operates, the practicalities and decisions they would need to make, and the implications and risk of doing so. Having a trusted provider in place to help facilitate access to drawdown for staff will make this process far easier.

These questions don’t have a simple answer. They require serious thought to ensure employees feel empowered with all the information they need. This will mean you are seen as the go-to informant on workplace pensions, and encourage more people to think about (and talk about) their long-term savings.

Fiona Matthews is managing director of LifeSight, Willis Towers Watson’s master trust