7 ways to make employee pensions less scary
How can we increase pension engagement so that more people have the chance to save enough for at least a comfortable retirement?
Already around a third of people (38%) are on track for pension savings which won’t even cover basic living costs, according to Scottish Widows’ 2024 Retirement Report.
Pension Engagement Season (PES), which started in early September and runs into November, is a great opportunity to help to improve on that startling statistic.
Meanwhile, here are seven ways employees can make the most of their pension savings and avoid some pitfalls – with no need to find it scary.
- Get to know that pension: ‘Know it and grow it’ is Scottish Widows message for this year’s Pension Engagement Season. Don’t leave it in the dark. Encourage employees to join webinars, ask the AI virtual assistant on our PES hub, or find out more information on our Retire Well hub. At the very least, reading those pension statements is a start.
- Don’t float towards your retirement – get ‘appy’: Downloading a pension app and getting to know what’s in those pension savings on a regular basis increases engagement. We can see how members who use our pension app get more engaged, and the app can steer them to take next best actions.
- They’re not alone thanks to employer contributions: Employees who don’t save are effectively leaving ‘free’ money on the table. Make them aware of this (and how much it’s worth), what any employer matching contributions are, and how pensions are a tax-efficient way to save. If it’s salary sacrifice, explain what that means and how it works. It’s a valuable benefit – so make sure they know; it’s a ‘stake’ in their future.
- Look after the living: Pensions can normally be passed on should someone pass away but many people don’t register or update their pension beneficiaries. It’s so important after major life events such as marriage, divorce, or the birth of a child, and not doing it can lead to family disputes or complications. It’s easy to update beneficiaries on a pension app, online or by contacting the pension provider. An employer’s death in service benefit would need its own nomination form too.
- Don’t let your pension pot become a zombie: With people joining different employers throughout their career, they can end up with a confusing number of pension pots due to auto-enrolment. It used to be said that people had 11 jobs on average throughout their lives, but some estimates now put that at 14. Multiple pension pots are harder to manage, can lead to higher fees and make it difficult for people to understand how much they’ve saved overall. Consolidating them can simplify things if it’s right for them. It’s all too easy to lose track of a pension, too. National Pension Tracing Day is the industry-wide campaign to reunite people with an estimated £31.1bn in lost pensions, worth an average of £9,500 each. That’s a spine-tingling amount and finding a lost pension could make a big difference.
- (Ghost)bust the pension savings gap: Retirement Living Standards show how much people will need to live on. How much? It’s £14,400, and £22,400 for a couple. With longer life expectancy nowadays, that can make it trickier to work out – and not everyone can pay for financial advice. Pension planning tools and calculators can help people work that out.
- The state pension is your Patronus to thwart the retirement Dementor: Borrowing the theme from Harry Potter, the State Pension is a valuable part of most people’s income in retirement. Yet many people don’t know when they are eligible (it’s 67 and due to rise to 68), how much they’re likely to get, if they’ve paid enough in NI contributions to qualify, and how they can top it up if they’ve missed years. Gov.uk has useful information.
With all the support and guidance available, employees don’t need to feel startled by their pension. Scottish Widows has Retirewell support and its webinars calendar, here and the PES hub.
In partnership with Scottish Widows
Scottish Widows is a life, pensions and investment company.
