Retirement planning: in it for the long-haul

The retirement landscape is almost unrecognisable from where it was back in 2012, with the introduction of auto-enrolment followed by greater pension freedoms in 2015. In five short years, the number of employees paying into a workplace pension has dramatically increased and now stands at more than 9.5 million people, while the number of retirees taking out annuities has plummeted and the proportion of people taking advantage of early access to their pension pots has soared.

For employers, it has never been more important to ensure that one of their biggest benefit spends is truly valued and that they are able to plan for the future. We take a closer look at the most recent research reports into this area and highlight what employers need to be doing to ensure they get the most from their investment.

The at-retirement support on offer

Thinking Ahead investigates what employers are doing to support employees in their mid-life through to retirement. Produced by the Institute for Employment Studies on behalf of the Centre for Ageing Better and the Calouste Gulbenkian Foundation, it offers insights on the types of support that employers are offering. It also identifies the motivations, barriers and enablers for employer support and considers what could be done to promote greater employer involvement.

Above all, the research reveals that employers are engaged with the challenges that lie ahead with ensuring their workforce is prepared for retirement. The motivations for providing support included the retention of valuable skills, the changing profile of the workforce and ensuring people were deployed effectively. In addition, the businesses surveyed were keen to be seen as employers of choice and believed that the health, safety and wellbeing of the workforce were critical contributors to future commercial success.

An employee perspective

Legal & General’s research explores the relationship people have with their pension savings, and their finances in general, and how that affects their health and wellbeing, financial security, and life satisfaction and quality. Although looking at retirement from a consumer’s perspective, The retirement income riddle highlights the risks people are taking with their pension pots due to a lack of understanding.

The report warns that, as access to advice at a price people are willing to pay becomes increasingly limited, there is likely to be an increase in the percentage of customers making sweeping financial decisions about their retirement without guidance.

Not only is this bad for those individuals making these decisions, but it does not represent good value to the employer who may have been contributing to an employee’s pension for several years.

Pension strategies in 2019 and beyond

The 2018 UK Pension Strategy Survey from Willis Towers Watson examines three areas: emerging developments in benefits strategy and how employers are supporting broader financial wellbeing; employers’ strategies for defined contribution (DC) provision; and changes to plan design in defined benefit (DB) schemes still open to future accrual.

Financial wellbeing programmes were found to be increasing in popularity, with one third of organisations stating that this was their top priority. Employers were also considering adding alternative savings products to their benefits packages if they already have flexibility in pension contributions.

Flexibility was certainly found to be a key factor for many employers, with many investigating what else employees can do with employers’ pension contributions, while almost 60 per cent of organisations were looking to review their at-retirement support.

The long-haul approach

Engaging employees, especially younger generations, with saving for their retirement is always going to be a challenge. However, with the growth of financial wellbeing programmes, it is clear that employers are starting to take a more holistic approach to employees’ finances by being more flexible and innovative with the benefits that they offer.

Financially preparing for retirement is not a sprint, it’s a marathon that both employees and employers have to commit to for the long-haul, and that means ensuring that all parties are aware of what’s at stake.

The REBA Reports Library has hundreds of reports, surveys and other handy documents pulled together from a myriad government departments, academics, independent organisations and suppliers. We have pulled them together for our members to use to find the data they need to support business cases, presentations and other reward work.

Dawn Lewis is content editor at the Reward & Employee Benefits Association.