A pension is a hugely valuable benefit. But while it’s vitally important, it’s also one which few employees really feel they really understand. We recently surveyed more than 2,000 workers – and supplemented that with a number of focus groups – and the findings make sobering reading. Only 23 per cent of employees felt they had any control at all over their own pensions – which is itself a key reason why so many don’t save enough for their retirement. Following on from this, 64 per cent had no idea of what income they’d have on retirement – but the majority felt that it simply wouldn’t be enough.
This directly leads to two further issues for HR practitioners. One is that poor pension provision will mean people working longer – or feeling that they’ll have no choice but to work longer. Our own research again suggests that up to a third of employees will work past 69 – and that heads of HR in larger businesses expect 44 per cent of them to work beyond state pension age. As many as 10 per cent of HR heads expect 75 per cent of their workforce will do so. The implications for the recruitment of younger talent and the management of this aging workforce are significant.
The new pension freedoms also have implications. The fact that over 55s can now access their funds early has had widespread coverage, but our findings suggest that only half of employers are confident that the Government’s own Pension Wise scheme will provide anything like the level of support needed to allow their employees to make informed decisions about what to do with their pension pots.
Decisions made in the run up to and at retirement, if not properly informed, could, of course, make a huge difference to the amount of income an individual receives. It should come as no surprise then that almost half of all employers fear that employees will hold their companies responsible if they make poor decisions. A further 56 per cent of employers worry that those poor decisions could well reflect badly on their own companies at some point in the future.
All in all a perfect storm of pension problems. But there are solutions, and they are here and available right now. Key among these is the need to restore control and confidence to employees themselves by giving them online access to support and information which can allow them to feel they can make the right decisions about their own futures. Not only that, but they themselves can decide just how much support they feel comfortable with – and how much personal control they want to take.
By using technology that’s already available, employers have the option to provide clear and regular communications to empower employees to feel more in control of their retirement saving. It’s unlikely that the majority of your employees will take action on their own, but giving them a clear and easy to use solution which sets out what they will need to save in order to receive an adequate income in retirement, gives them the opportunity take that back that control for themselves. In our survey, 64 per cent thought that access to suitable online tools would be one way to make them feel more in control.
HR professionals need to be concerned that lack of engagement with retirement saving could lead to their employees being forced to work longer than they want to. An ageing workforce can negatively impact a business as well as employees themselves. Giving your employees access to technology that demonstrates how the choices they make now will impact their future gives them the peace of mind that their retirement saving is taken care of, and helps your business do the best by its staff whilst keeping workforce planning under control too.
Ian Smith is senior consultant at Hymans Robertson