How to help employees avoid dipping into pension savings
As financial pressures on UK employees continue to grow, new research by WEALTH at Work has found that many people are having to rethink their retirement plans.
It found that eight in 10 employees (83%) are concerned that the cost-of-living crisis means they will have to work longer before retiring to make up for a shortfall in their savings.
Worryingly, one in three (33%) believe that they won’t ever be able to afford to retire due to cost-of-living increases. Some have even reduced or stopped their pension contributions altogether because of rising costs (13%), while almost three in 10 (29%) admit that they may consider stopping payments, and one-third (30%) may think about reducing future payments.
Mortgage crisis looming
This will be of particular concern, especially when lower fixed-rate mortgage deals come to an end and if inflation doesn’t come down as quickly as initially hoped.
Further to this, one in 10 (10%) of those eligible to access their pension (ie those aged 55 or over) say they have withdrawn savings early to supplement their income, with a further 31% intending to do so or considering it.
When it comes to getting support with their pension, 56% say they speak to unqualified sources such as their partner, family, friends or colleagues, or no one at all. Very few speak to their pension provider (15%), employer (13%), a regulated financial adviser (8%) or specialist bodies such as Pension Wise (4%) or MoneyHelper (3%).
Employees don’t feel supported
While more than one in three people (37%) don’t feel supported by their workplace to understand their finances, research from the Reward and Employee Benefits Association suggests that more employers are now starting to offer this support.
“It’s alarming that these latest figures suggest that so many people are thinking about stopping or reducing their pension contributions to help alleviate current financial pressures,” says Jonathan Watts-Lay, director at Wealth at Work.
“While this is understandable, it really should be a last resort and only if you are facing serious financial difficulties.
“Those who do go ahead with it should make sure they plan how long it will be for, and restart as soon as they can. While it may result in relatively small savings each month, the impact on retirement savings to be used in later life will be dramatic due to lost employer contributions and tax relief.”
How much is enough?
Given the widespread concern over having enough money to retire, it’s more important than ever, particularly for those approaching retirement, to have a financial plan for their future.
That means looking at the pensions, savings and investments they have and deciding if these will be enough to retire on comfortably. Government bodies such as Pension Wise and Money Helper are a good starting point for guidance.
Those with more complex situations should consider taking regulated financial advice. Fortunately, many employers offer financial wellbeing support in the workplace, including financial education, guidance and regulated financial advice for employees, so it’s worth finding out what’s on offer.
To read the full article in the ‘Future of Pensions’ report by Raconteur, distributed in The Times, click here.
Supplied by REBA Associate Member, WEALTH at work
WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.
