How modelling can support pension adequacy
Even with the best intentions, many factors can get in the way of adequate pension saving. Career breaks, both planned and unplanned, can have one of the most detrimental impacts on pension savings.
REBA’s report, Impact of ill-health and career breaks on pension adequacy, in partnership with Aviva, demonstrates how scenario modelling can help employers to understand how career breaks due to sickness absence, family leave or sabbaticals can significantly reduce retirement savings.
Visualising the impact of a break
As organisations take a more active role in early intervention and return-to-work support, conversations with those taking a career break can bring the reality of inadequate pension savings to life.
Career-break tools allow employees to model different scenarios to understand how changes in contributions, earnings or working patterns affect their projected retirement income. For example, the impact on pension savings of taking a few months off compared to a multi-year break.
Employers can use measures such as Pensions UK’s Retirement Living Standards and other career-break modellers to show how different choices affect future income.
By making these trade-offs visible, the tools help employees plan ahead, weigh up their options, and make more confident decisions about when and how to take time away from work.
Employers need the tools to be able to support their workforce to properly understand the impact that savings gaps have on their long-term retirement goals. Our career-break tool helps users to visualise how taking time out or reducing hours affects their pension pots.
Increasing pensions engagement
According to the Impact of ill-health and career breaks on pension adequacy report, scenario modelling can also be used to drive engagement among the wider workforce.
Scenario tools enable employees to make informed decisions with confidence, not fear. By understanding the impact of changes such as varying contribution levels, employees can weigh their options, plan ahead, and take confident action to stay on track for retirement.
For further insights into how organisations can use scenario tools to support and engage workers with pensions, read REBA’s Impact of ill-health and career breaks on pension adequacy report.
Supplied by REBA Associate Member, REBA
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