Achieve better retirement outcomes for employees - here's how
In the 20 years since Scottish Widows’ first Retirement Report, auto-enrolment (AE) has brought 10 million employees into retirement saving through their workplace pensions.
Automatic enrolment has been the biggest, positive change over that time, with 79% of those eligible participating in workplace pensions, which they pay into along with their employer.
For many, it’s become an important workplace benefit and a tax efficient way to save for their future.
Yet, this year’s report shows many people’s retirement prospects are worsening in the face of cost-of-living challenges, and higher mortgage and rent costs.
A third face retirement poverty
More than a third (38%) of people aren’t on track for even a minimum retirement income and won’t have enough money to cover the basics in later life, up 3% on last year’s findings.
Almost 7 in 10 (66%) admit they’re not saving adequately for their future, and just over half (54%) say they expect to work seven years longer than they’d like.
Of those who have already retired, 37% are helping their own children or grandchildren financially, often prioritising their family’s needs above their own.
A welcome bright spot is that the gender pension gap between women and men has narrowed (to 33% of women 50-64 years old, since 2008) as more women participate in pension saving.
It is groups such as women – often in lower paid, part-time jobs due to childcare costs and responsibilities and the gender pay gap – that still lag, as do those with a disability, among others.
What’s the answer?
While the Retirement Report shows that the picture for men and women in retirement is becoming more challenging, there are things that can be done.
Part of the answer must be to take AE further as the last Government announced would happen.
Extending auto-enrolment to employees from the age of 18 and from the first pound of earnings, could increase the future pension pot of a woman who is 18 today and works full-time their whole life until the age of 68 by £46k in today’s money.
This increase comes from an extra four years of saving at the beginning of their working life, as well as an additional £500 in savings in today’s money from the removal of the lower earnings limit.
The changes will be most valuable to the young and lower paid, including those who work part-time, most of whom are women.
The pensions engagement challenge
Many more people could have a much better retirement outcome. Meanwhile, helping people to make the very most of what they have is critical.
Knowing what they need to save and how much they already have is a great starting point, and employers and providers are working together to offer tools, comms and guidance, getting the message out on Tik Tok, podcasts as well as encouraging people to sign up to their pension app.
Pension engagement can be a tough nut to crack but Scottish Widows has made huge strides on this, including the launch of the AI-powered Pension Mirror during 2023’s Pension Engagement Season.
Getting people to check how much they’ve saved compared to their peers by taking a fun selfie on their smartphone certainly raised the engagement bar.
Pension Engagement Season (PES) begins again on 9 September this year with the aim of helping millions of people to pay their pension some attention like never before, track down lost pensions and get saving.
Building on that to reach as many people as possible all year round is the logical next step.At Scottish Widows, we run monthly webinars to give people the information and the confidence to make the most of their workplace pension.
Tens of thousands of people have already joined, downloaded their pension app and got into the habit of knowing how their pension is doing and growing it. It’s a fantastic outcome, but there’s clearly much more we all need to do.
Read the full Retirement Report here.
In partnership with Scottish Widows
Scottish Widows is a life, pensions and investment company.
