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20 Feb 2023
by Saba Haran

8 top tips on how to better engage employees with their pension

With many people not on track with their pension saving and a growing number of employees opting out to save cash, what can employees do to help?

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The average UK retirement income varies greatly depending on several factors, including an individual's contributions to a pension plan, the type of plan, eligibility for state pension and their savings, as well as inflation and individual life expectancy.

According to the Pensions and Lifetime Savings Association, a single person needs 23,300 a year to to achieve a ‘moderate’ standard of living in retirement, or £34,000 for a couple. This is enough for reasonable financial security and flexibility, including a two-week European holiday each year and eating out a few times a month.

As of 2021, however, around half of single employees weren’t on track to achieve the moderate standard. This number is also likely to have increased recently, as the rising cost-of-living forces individuals to tighten their budgets and prioritise short-term costs.

According to the Department for Work and Pensions, 10.4% of newly enrolled employees opted out of their workplace pensions in August 2022, up from 7.6% in January 2020.

How financial education can help

It’s important for individuals to think carefully about whether they are saving enough for retirement. By supporting employees with financial education, employers can make a difference.

Primarily, the impact of having a clear strategy on financial wellbeing can improve financial literacy, helping employees understand their finances better and make informed decisions about their money, reducing the risk of financial stress.

This, in turn, enables better planning and decision-making, giving employees the tools to plan for the future and set financial goals.

In the case of pensions, this allows them to secure a more comfortable income on retirement and gives them greater freedom to live their best life, while reducing the risk of poverty in old age.

Employees aren’t the only ones who stand to gain from financial education, however. From an employer’s perspective, the business case for providing financial education is strong.

By reducing stress and improving financial literacy, employees are more likely to experience improved wellbeing – improving employee health, reducing absenteeism and increasing employee engagement at work.

8 top tips for employers:

1. Provide clear and concise information – ensure employees understand the basics of their pension plan and the benefits of participating. Use simple language and visual aids to help employees grasp complex concepts

2. Encourage employees to pay in as much as they can – if you offer a tiered contribution structure, make sure employees know how to make the most of your contributions

3. Use salary exchange – if it’s right for your demographics, it’s a more tax-efficient way for employees to save

4. Communicate regularly – keep employees informed about their pension plan and provide updates on their progress. This can be done through regular newsletters, employee meetings, or through your flexible benefits or online portals

5. Provide financial education – offer educational resources and workshops to help employees make informed decisions about their pensions

6. Encourage planning – help employees plan for retirement by providing tools and resources to estimate their future income and expenses

7. Personalise the experience – provide personalised communications and services to help employees feel more engaged and invested in their pension plan

8. Foster a culture of saving – encourage a culture of saving and financial planning to help employees prioritise their pensions.

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