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How to motivate mid-life employees to save for retirement

People aged between 45 and 54 are particularly vulnerable to pension inadequacy, according to Phoenix Insights

Visualising retirement is key to maintain pension saving for employees aged 45 to 54, according to thinktank Phoenix insights.

Research found the top way that ‘midlifers’ (aged between 45 and 54) stay motivated to save is by visualising what they want their retirement to look like (30%), followed by regularly reviewing their expenses (26%) and planning with their spouse or long-term partner (22%).

Other methods include setting clear goals for how much they want to save (21%) and talking to friends and family about their plans (11%).

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Patrick Thomson, head of research and analysis at Phoenix Insights, told HR magazine that midlifers are particularly vulnerable to pension inadequacy.

Phoenix Insights estimates that the average 45-54-year-old in the UK has £88,000 saved for retirement. This is £160,000 behind the Pensions and Lifetime Savings Association (PLSA) estimate for achieving a moderate standard of living in retirement (£248,000). 

He said: “This deficit is, in part, due to this generation having missed out on certain schemes that have benefited others. For example, this age group is less likely to expect a defined benefit workplace pension when they retire compared with those aged 55 and over. 

“At the same time, they also missed out on the benefits of auto-enrolment for as many as 21 years of their working life, as the policy came into force in October 2012.”

Thomson added that pension saving has been more difficult during the cost of living crisis.

He said: “Saving for retirement may not have been top of people’s priorities in recent years amid cost of living pressures and rising interest rates, but it’s important people don’t overlook their long-term finances.

“The new year provides a great prompt for people to take stock of how much they have saved and put plans in place to close any savings gap. With inflation cooling in recent months, households might have some additional respite from the cost of living squeeze to enable this.”

Nearly two thirds (63%) of people in mid-life say their savings have been impacted by rising prices and a further fifth (20%) by higher mortgage costs. However, the majority (72%) agree it’s 'never too late' to start thinking about saving for retirement.

Read more: A fifth of private sector workers are not saving for pensions

Employers should encourage saving above the minimum contribution of 8%, according to Alyshia Harrington-Clark, head of direct contributions, master trusts and lifetime savings at the PLSA.

Speaking to HR magazine, she said: “Although minimum contributions are currently at 8%, there is a general consensus that greater retirement saving is needed to make sure that employer contributions are maximised. 

“Encouraging all employees, including those in mid-life, to prioritise pension savings starts with engagement. Employers play a pivotal role in highlighting workplace pension benefits such as tax relief and employer contributions – which can significantly enhance retirement prospects and help people achieve an adequate pension.”

Kate Smith, head of pensions at Aegon, added that employers should focus on regular and manageable financial education.

She told HR magazine: “People may be more likely to make financial resolutions at the beginning of a new year – so employers could try to use this to nudge their employees into prioritising pensions, understanding their value and visualising their life after work.

“For those in their 40s and 50s, employers could encourage their employees to take a mid-life financial and wellbeing MOT so they can check whether they are on track for the retirement they aspire to, and if not, the action they can take to get them back on track. 

“This could include encouraging employees to sign up to view their pension online, consolidate their pensions, use online planning tools and make active decisions such as increasing pension contributions and completing a death benefit nomination form.”