How to help employees build a road to a happy retirement
At some point, perhaps in their late 40s or early 50s, people begin to think about their future beyond work. One burning question often dominates: will I have enough money for a comfortable retirement?
Usually, the answer is a combination of good and bad news. The bad news is that they probably haven’t. The good news is there’s time to put it right. What’s more, they’re often in a strong position to take remedial action. As people age, they’re less troubled with day-to-day money management. Their salary is usually higher, the mortgage payments less onerous and children may no longer be financially dependent.
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How much do I need?
To answer the question, it’s important to understand how much is needed for a reasonable retirement and how close someone might be to reaching that figure at the point they plan to retire? Most people will struggle to answer these questions. Their company pension scheme will provide an annual statement of the value of their savings in that scheme, but it won’t look beyond and it won’t define how much they need.
The significance of this can’t be underestimated. This year alone, three separate reports have highlighted the seriousness of this issue. A Phoenix study released in September revealed that more than 12 million people in the UK expect to receive the minimum income required to get by in retirement, but aren’t on track to achieve it.
A Department of Work and Pensions report in June revealed that only one in four people have an idea of how much they need in retirement. More recently still, an Aviva report released in October showed that among larger employers with over 10,000 employees, 44% don’t know how much they need to save to live the lifestyle they want in retirement.
Time to take corrective action
These are shocking statistics. Help is available, but it may be too late. For example, Pension Wise. Pension Wise is largely focused on explaining options at retirement, rather than evaluating preparedness for retirement early enough to take corrective action. Advice could be the answer, but this is often considered expensive.
Fortunately, there are services that can solve the problem simply in a matter of minutes. And free of charge. They calculate how much has been put by already in pensions and other savings, estimate the value of any ongoing pension contributions, and future savings, between now and retirement.
The State Pension is included plus any defined benefit pension income. The result is compared with what they’re likely to need (based on a percentage of current earnings). In a matter of minutes someone can see how prepared they are for their future life after work.
Avoiding nasty surprises
Many people are likely to find there’s a shortfall. Nasty surprises like this can lead to dissatisfaction with the process. Feeling unprepared is likely to have an opposite effect to that intended.
Giving people a plan they can work towards fuels a sense of self-belief and mastery. This creates a feeling of optimism and wellbeing, and builds confidence in the future. Many wellbeing schemes focus on day-to-day money management, but financial concerns about life after work can be a higher priority for this age group. A simple planning process like this can alleviate stress.
As companies develop wellness programmes focused on life after work, it’s important to recognise that retirement planning starts many years before the process of retirement begins. The best life after work wellness programmes will include planning tools like this aimed at the 45-55 age range as well as propositions targeted at those starting the process of retirement.
The good news is these programmes are already available for employers to offer employees. They demonstrate a genuine concern for the welfare of employees. Most importantly, they help employees make better decisions, so they can look forward to the future with confidence.
In partnership with HUB Financial Solutions
We offer a range of investment funds with different levels of risk.