By Dale Critchley, Workplace Policy Manager, Aviva
Around a third of employees (35%) do not think their pension will provide enough for a comfortable retirement or believe their pension will only provide enough to get by (34%).
We know that people struggle to make decisions about their pensions, and we know that pension saving can feel complicated. Three quarters of employees are looking for more support from their employer about planning for a financially comfortable retirement. With 51% looking for help on how they can build up a pension pot and 60% on how to make a pension pot last through retirement. This reflects the range of options and trade-offs that now exist within money purchase pensions.
The challenge for employers is how to provide the help employees are looking for which will provide the financial confidence to seize the day and put pension plans in place.
The type of support required will vary among employees but regardless of age or earnings there are likely to be people within every workforce with concerns about how they will fund their lifestyle once they give up paid work.
Information about retirement planning is the most basic level of support that can be offered. Only 7% of employers do not provide any information about pension planning and twice that number (14%) admitted to sending the bare minimum.
It is clear that although most employers are providing information, a large proportion of their employees don’t think this is enough to give them the confidence to make informed decisions.
Financial education sessions and providing opportunities to ask questions and seek clarification on areas of concern can help people understand more about their pensions. Online tools can also help people model what their contributions might deliver or how long their pot might last in retirement. Employers should not only consider the content available but also the extent to which employees use it.
Well timed communications which are tailored to the needs of different employee groups can be effective in promoting registration for online access and the use of the tools that are available. There can be a remarkable difference in the take-up of these services between pension scheme providers, driven by the quality of the online experience as well as the level of integration with proactive communication.
Practical help to locate and consolidate pension savings into a single pot, as well as pre-built at-retirement solutions can help simplify some of the decisions that individuals may otherwise struggle with or choose to avoid making.
Avoidance can become more of a problem when the amounts involved are larger. The risks associated with ill-informed decisions are bigger, requiring greater levels of financial confidence before decisions are made, but avoiding the decision and doing nothing can be equally costly. Financial advice should be a consideration for these employees, to provide them with the confidence that they, or their adviser, has everything under control.
Improving financial confidence is key to improving financial wellbeing, reducing pension planning anxiety, and delivering a better retirement. By providing employees with the tools they need today, employers and pension providers can help people make plans today, for a better tomorrow.
(1) Aviva Working Lives Report 2024: Working for the Future
|
