Only 23% of middle aged employees say that their employer currently offers retirement planning advice as part of their benefits package. The majority either know for certain that they do not have financial advice as part of their retirement package (51%) or simply don’t know (26%). However, of those who are not currently offered financial advice as a benefit, two thirds (65%) say that they would like to be.
However, despite the desire for more support around pension savings advice, it appears that employers have some work to do if they are to be seen as a credible source of advice around pensions. Currently, according to JLT’s research, employers are one of the least trusted sources of pension savings advice, with only a quarter (26%) of 40-65 year olds likely to trust financial advice given by their employer. Only the media is a less trusted source for such advice.
The most trusted recommendations around pensions savings that people would take is that of an independent financial adviser (IFA) (55%), followed by the government’s Pensions Wise (51%) guidance offering and their bank/pension provider (33%). Perhaps the most surprising finding is that ‘family and friends’ are cited as more trustworthy than employers in providing guidance and recommendations around pension savings.
Commenting on these findings, Richard Williams, Director, Pension Decision Service, JLT Employee Benefits, said: “Our research reveals an interesting paradox. It is clear that too few employers are offering sufficient support to their employees around pension savings, and that advice as a benefit is not as commonplace as it perhaps should be. However, although the desire to have more support is there, the scepticism around employers offering such a service will need to be overcome. The quickest route to solving this perception gap for most employers will likely lie in partnering with reputable experts who can be the credible face of pensions advice and a portal to greater employee engagement with their occupational savings.”
Employees lack of engagement in their savings is amply evidenced by their lack of knowledge around some key pension-related products and topics. By way of example, there is little understanding of financial products available to savers upon retirement. Nearly half of respondents (46%) don’t know what an annuity is, while fewer still do not have any concept of flexible access drawdown, an enhanced annuity, or uncrystallised funds pension lump sum, with 68%, 81% and 90% of respondents respectively not knowing what these at-retirement options are.
In terms of affording financial advice, the majority of people are in the dark about a new way that they can pay for it. More than three quarters of respondents (79%) did not know that under a Government initiative you can access your pension savings to pay for financial advice.
In spite of this lack of knowledge, or perhaps because of it, there is a belief amongst middle aged Britons that younger generations are poorly equipped to make informed financial decision, with 85% thinking that employers should supply younger people with wider financial education, including saving for a pension.
Richard Williams added: “A lack of engagement fosters a lack of awareness, and this research shows how far the pensions industry still needs to go to properly engage with savers and get them thinking about their retirement. Post RDR, a lot of people see financial advice as expensive and out of their reach. In addition to getting more employer support it is vital that the message around the importance of getting advice is made alongside ways people can fund it.
“It is interesting that, despite being relatively poorly informed about pensions, middle aged employees think that younger generations know even less. Upskilling the financial literacy of the workforce is a huge challenge for employers, government and society more broadly. However, given that the prize is for better financial planning and better retirement outcomes for UK workers, it is a challenge worth rising to.”
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