Help older employees to avoid raiding their pensions savings
Inflation and the cost of living crisis has hit everyone hard. But it’s Gen X and baby boomers that are particularly affected by the rising cost of living when they start thinking about retirement plans. Many are finding that they’re dipping into their savings or their pensions to make ends meet, which will mean less to retire on, if they are able to retire at all.
The rise of pension dipping
According to Inews, most UK pensions are worth less than £30,000 and many people who thought they could retire at 65 or have already retired are finding they might have to keep on working or re-enter the job market.
Dame Julie Unwin, Former CEO of the Joseph Rowntree Foundation, says, “Any disruption in earning capability in the decade before the state pension is forcing older workers to draw down on savings earmarked for retirement with little ability to top up the pot, leading to the risk of financial vulnerability becoming lifelong.”
US global management consultancy Mckinsey says as many as 80% of baby boomers might not be prepared for retirement, according to its nationwide survey.
The drawback to baby boomers re-entering the job market is that they might not have the digital skills required for some jobs and the stress of working to be able to make ends meet might push some to breaking point.
Financial advisers Unbiased says 63% of Brits have little idea of what a pension pot should be or that retirement requires planning. In Unbiased’s survey, they found 71% say they won’t be able to retire before the age of 66.
So what has been done to help ease the burden?
In the UK, some government measures have been brought in such as cost of living payments and energy / tax credits, while other governments in the EU have taken steps (for example, Germany has cut train fares, Spain has lowered VAT on electricity).
What can really make a difference to employees are benefits that employers can offer. Here are some of the ways in which an employer can help employees navigate their way through these troubled times of high inflation and avoid pension-dipping:
1. Offer personalised advice as an employee benefit. Employers can make this available at low cost and can offer it across whole organisations. When employees know they can access financial advice at any time they will feel more secure in their employment and will fear retirement less.
2. Retirement advice. This is along the same lines as the first but shouldn’t be made available to the oldest employees. Retirement advice might seem a long way off for younger employees to even consider, but making it available strengthens an employer’s benefit offering and might even be a reason for younger employees to stay working for an employer longer.
3. Decumulation Robos. This is becoming a trend, especially in the US, and involves decumulating assets, for example stocks and shares, to provide cash to maintain quality of life at retirement. There are many ways in which someone can do this and is made easier with digital tools that automate processes.
4. Offering family healthcare benefits. Alongside flexible work as being a good benefit for the sandwich generation, employers should consider making family healthcare available through their digital benefits platform. If an employee knows that their family members are catered for through their work benefits, then it’ll be much easier to retain them, especially during times of ‘The Great Resignation’.
There are more benefits employers can provide to ease the fears that some older employees have when they think about retiring and whether they actually can. Employers shouldn’t leave it until an employee is forced to sell their house to make ends meet, or wait until they get a call asking if they can come back to work again after deciding to retire. Making benefits available will put employees’ minds at rest – young and old.
Original article: How the cost of living crisis is impacting employees’ retirement plans and what can be done about it.
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