Coronavirus: what employers need to do to support employees’ financial health at retirement
A recent Financial Times article didn’t exactly sugar-coat it: “If you were planning on retiring soon, don’t”. With stock market fluctuations squeezing pension pots across the world, what your employees have built up to retire may be a lot lower than they planned. Many may be looking to delay their retirement.
That also puts you, as their employer, in the hot seat. Around 65% of the UK working population want their employer to provide consultation and advice with regards to their retirement savings, according to State Street Global Advisors (2018).
So what can you do to help them during this time of change?
Remind them: it’s THEIR retirement, not someone else’s
Employees’ financial circumstances differ – as will their goals. It’s important you stress this point in any communications. Many will look to what their peers are doing but this can be risky. They may think their situations are broadly similar but often this is not the case. That’s why it’s important employees step back and take stock of their personal situation.
Before they can take action they also need to be clear on their goals. Do they want to be debt free? Have they paid off their mortgage? Are they on track to have enough income for their daily (and emergency) needs? Do they have sufficient savings to enjoy life as they see fit? If the answer’s “No” to any of these, which will they prioritise?
Make sure they know to get the right help
One of the biggest retirement mistakes we see is employees not getting the right guidance or advice when making retirement decisions. As there’s so much at stake, retirement is a time when advice could be worth paying for. Having an expert come in to speak to employees about retirement options can give them the peace of mind that the decisions they’ve made are right for them – and give them the ability to follow up with an adviser they know they can trust to get more personal recommendations.
There’s also Pension Wise, a free and impartial government service. They offer a guidance session to everyone who’s over 50 and has a money purchase pension. Your employees can find out about the different ways to take money from a personal or workplace pension. They also cover how each option is taxed and will give information on the next steps. Even if someone has already got a retirement plan worked out, it never hurts to get more information.
Finally, pension calculators are a useful tool to help determine how much your staff could get when they retire, how much they should consider saving to achieve their target and evaluate whether to delay taking their pension. The Money Advice Service has an easy-to-use calculator employees can use. The figures can be a useful starting point but are not guaranteed.
It might also be worth making such useful resources available in a Retirement Hub on your intranet. This means your employees can access all this information in one place.
Help them steer clear of scams
Sadly, where most of us see tragedy, scammers see opportunity. The latest figures show a big jump in reports of coronavirus-related scams since the outbreak began. The average cost to a pension scam victim is around £82,000. How can you help your employees protect themselves? By getting the word out about the classic pension scam red flags:
- unsolicited contact
- pressure to act quickly
- allowing early access to pension (before the age of 55)
- a free pension review
- offers of guaranteed or high returns at low risk.
For more guidance, visit The Pension Regulator’s website.
Don’t forget your younger employees
Learning about retirement shouldn’t be just for those who are nearly there.
Younger employees may feel it’s not relevant for them but this would be a mistake. Everyone is going to want to retire at some point.
As their employer, educating your entire workforce about their pensions and options at retirement can support their financial health in the present but, crucially, reinforce the importance of healthy financial decisions later in life.
Employee Benefits pension research from 2019 identified the top five retirement concerns employers have for their employees:
- Uncertainty about how to make the best decisions when accessing their pension benefits (74%).
- Lack of a financial plan (59%).
- Running out of money in retirement (58%).
- Financial security in retirement (54%).
- A lack of understanding around the tax implications of accessing a pension (43%).
Taking this research into account, it’s crucial to provide the right support to your staff. An employer is in a unique position to help with pension and retirement planning. Choosing the right moments to discuss your pension offering with your employees can help to emphasise the importance of a pension later in life.
Furthermore, educating your employees around important investment concepts like compound interest, as well as introducing them to online retirement calculators, can go some way to making your younger employees feel more in control of their financial future.
A better approach
As more employers adopt an open forum for discussing retirement and pensions, employees will feel empowered to make the financial decisions that are right for them.
This article is provided by Hargreaves Lansdown.
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