6 top tips for an effective pre-retirement programme
Has there ever been more noise about retirement and pensions? To name just some of the recent headline grabbing issues:
- unexpected new pension freedoms in 2015
- high-profile state pension changes (retirement age increases, flat-rating, WASPI and the expected threat to triple lock in the run up to the general election)
- reduced allowances (annual, lifetime and money purchase annual allowance)
- BHS, Diageo and British Steel’s creaking final salary schemes
- the rise in scammers trying to con people out of their hard-saved pension fund security
Many of us in the financial wellbeing community firmly believe that the very best employers have grasped the following fact: most employees are overwhelmed by the level of complexity around their retirement choices, almost to the point of paralysis.
So here are my top tips on delivering an effective employee pre-retirement programme:
Have a pension communication strategy that engenders employee retirement interest from the minute they join you. It is probably the simplest and most obvious statement to make – get your staff interested early, and they will have a better experience and a greater chance of enjoying a good outcome.
This may also seem blindingly obvious. There is a famous Harvard experiment that shows those who make a targeted plan, and have something to aim at, are more likely to get somewhere successfully than those who do not.
So we need to ensure employees have access to tools that help them realise what is needed in order to retire comfortably, and that they use them. Many pension scheme websites have these very tools. However, sadly, with average registration take-up at around 10%, we are aware that many employees don’t use them.
There is going to be an explosion in the financial technology sector in the form of robo-advice. These online advisory tools will inevitably look at finances holistically, but a key feature will be employees’ retirement journeys, and this has to be good news. My sense is that the more intuitive the technology that reaches out towards employees, the better the levels of engagement will be.
There is less and less agreement about ‘when’. The new pension freedoms have given greater access and control, and the result is that people are taking their benefits earlier. They may not be fully retiring, and this is backed up by the doubling of those who are working, earning and also drawing from some of their pension pots.
In short, phased/semi-retirement is the new rock and roll. There is a need for employers to understand these changing times and be aware that the retirement age is no longer 65. The design of material and content to educate employees may need to target those in their 50s now, which never used to be the case.
Above everything else, employees seem to take on board the most when they attend a well-planned and delivered pre-retirement event. In my opinion, these sessions need to be the following:
- Off-site – or at least in an area of the business that will allow employees to feel at ease and where they can switch off from ‘work-brain mode’.
- With a partner (where applicable) – the best sessions I have ever run tend to include spouses and partners. There are huge decisions that need to be made about the long-term deployment of accumulated pensions and savings and they have to be done so jointly.
- Without a device – just being away from a desk or function doesn’t make an employee focus on the session they are attending. My preference is that mobiles, laptops and tablets are always switched off – or even better, not in the room!
- Holistic – it’s not just about annuity vs drawdown, or how benefits are taken. The best sessions include case studies and look at allowances, taxation, wills, health, lifestyle and all areas of financial good sense.
- Supported by an advisory option – inevitably a well-received pre-retirement session will generate some guidance and advisory needs. I have no hesitation in initially directing people to Pension Wise, as it’s free. But once this develops for the handful that then need advice, it is much appreciated if there is an option linked to the workplace.
6) Feedback and review
Ensure that each session invites constructive feedback so that sessions can be evaluated, reviewed, improved and updated in line with industry, legislative and economic changes.
Employers getting these fundamentals right are likely to be able to claim that they have an effective pre-retirement programme. However, they will be well advised to reach out for some expert guidance on the subject as these sands, they are always a-shifting!
James Biggs is head of financial wellbeing at Lorica.
This article was provided by Lorica.
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