Research: the perfect savings storm that will impact the workplace

I am delighted to present the findings of our research into pensions and retirement which forms part of our 2017 Employee Insight Series.

For me the findings of this Employee Insight report bring into stark reality the perfect storm that is brewing when it comes to providing for an income in later years and the impact it will have on all aspects of society. The elements creating the storm are:

Individuals underestimating their longevity
Confusion over the best way to save
The need to live for today and conflicting calls on disposable income
'Freedom and Choice' pension regulations meaning a whole new decision making process for many individuals, with significant consequences if the wrong decision is made
Auto-enrolment creating a false sense of security around income adequacy
Apathy towards retirement

I'm not saying that all of the above are bad, clearly auto enrolment and Freedom and Choice on their own are good. But when we bring the elements together we create the recipe for a perfect storm.

This storm has the ability to have a profound impact on the very fabric of society. Apart from the clear implications for the individual, the workplace is likely to be one of the most impacted. For example:

Individuals not considering outcomes until it is too late and therefore having to work beyond their initial intentions, leading to resentment and a demotivated workforce.
The 'walking dead' - individuals who are unwell, but continue to work out of necessity. This may result in an increase in absenteeism as well as the cost of providing life, health and income-protection benefits. This issue is likely to be particularly relevant to those working in manual roles.
The impact on succession planning - if there is no career progression then the best talent will no doubt move on.
Overall impact on productivity.

Therefore employers and fiduciaries need to consider the whole journey from an individual perspective, regardless of when an individual joins the organisation. This is crucial to its success as well as that of the individual - so there is a common goal.

Our research leads us to believe that the following approach will lead to be best outcomes for all parties: design, educate, engage, empower.

Smart Design

The design of the saving package needs to be carefully developed. Our research shows that there are differing priorities at each stage of life and these need to be embraced.

It is really important to get individuals to get into the saving habit - pensions are not at the forefront of a new graduate's thoughts, but having a 'smart design' benefits package that allows an individual to pay off student debt or save for a house (e.g. using LISA) whilst still meeting legislative requirements, will appeal.

Educate

Our research shows that there is confusion out there around pensions and retirement and this needs to be addressed - it is a fundamental to achieving a good outcome for all parties. If ever the phrase 'unknown unknowns' was relevant, it has to be when thinking about saving for the long term!

It is also important to educate in the right areas - we can't expect everyone to become an investment expert, that's what a strong governance structure is there for. But we can, for example, educate on the importance of income in retirement, the options available and the consequences of inadequate planning.

Engage

Making savings a more immersive experience is essential. Effective governance and understanding the demographics of the workforce is critical to this. There is no point in telling a 25 year old about retirement options. Providing the 'right information to the right person, in the right way and at the right time' is a mantra that all should adopt.

Modern technology makes this a lot easier to do, though interestingly our research shows that nearly 60% of respondents would still like a letter once a year.

Execute

Modern day life means that once a moment is lost, it will never come back - so if an individual decides to increase contributions, the ability to do so has to be there immediately. If this is not the case then outcomes will be impacted. Even a simple barrier such as not being able to execute a decision on-demand risks putting people off saving.

Lack of FOMO!

Fundamentally our research shows a clear lack of Fear Of Missing Out (FOMO - a term my daughter assures me is now common vernacular!) from individuals regarding saving for the long term.

Not many people get FOMO around long term saving (or saving of any type). This is the mind-set we need to strive for - only then will the perfect storm be averted to the benefit of everyone. I hope you enjoy reading the report and I know that the team would be delighted to hear any feedback, as well as suggestions for future editions. In the meantime, let's strive for FOMO!

Our new Pensions and Retirement research report draws from a survey of some 1,200 UK employees and forms part of our Employee Insight series 2017. Download the full Pensions and Retirement Report here

Anish Rav is head of DC proposition and strategy at Capita.

This artice was provided by Capita Employee Benefits.