- 51 per cent of employers believe the issue of employees being unable to afford to retire when they want to will become a reality within the next 10 years
- These findings are supported by DC savers. Over a third say they will work longer to make up any shortfall in their pension
- 78 per cent of employers have considered the impact that this would have on the company. 72 per cent say this would lead to an inability to take on younger employees and graduates, whilst a third say it would have a negative impact on productivity
- The research comes as Hymans Robertson launches Guided Outcomes (GO), a new unique way to actively help employees achieve an adequate income in retirement
The inability to retire is being driven by the increasing use of Defined Contribution pension schemes, many of which in their current form are unlikely to deliver adequate incomes for many workers. Over two thirds of employers believe they will see almost half their workforce (47%) unable to retire at SRA and nearly four fifths (78%) have considered the impact that this would have on their business. Their top concern about the implications of this is bringing in fresh talent into the organisation. Almost three quarters (72%) say it would lead to an inability to take on younger employees and graduates. Furthermore, over a third believes that it would have a negative impact on productivity.
The research comes as Hymans Robertson prepares to launch Guided Outcomes (GO), a unique new way to help employees manage their Defined Contribution pension better.
Commenting on the research findings, Lee Hollingworth, Head of DC Consulting at Hymans Robertson, said:
“Over the next decade, the number of people retiring on a DC pension is set to escalate and, as things stand, many people will find they have not saved enough and may need to delay their retirement. Everyone knows that the shortcomings of the DC system are a big issue for individual savers, but the impact this could have on employers and younger generations of job seekers is less widely discussed.
“Employer’s concerns about people working longer seem to be mirrored by the employees themselves. Over a third of DC savers say they will work for longer to make up for any pension shortfalls. Clearly, with the abolition of the default retirement age this could lead to a ‘career crunch’ for younger generations as businesses struggle to take on younger employees and new graduates. Furthermore this could present a significant business risk for employers in terms of productivity, performance management issues and profitability.
“It is essential that we take action now. Employees care about how much they will get in retirement, but often aren’t saving enough. There is a clear need for a new approach to DC governance practice which enables employees to easily manage their pension saving more effectively to stay on track to achieve an appropriate retirement income target.”
About Guided Outcomes:
Guided Outcomes is our version of ‘Defined Ambition’, putting in place an infrastructure to make DC work harder for employers and their employees.
GO allows employers to stay on top of DC scheme management. The research found that 90 per cent of employers would like to ensure staff are able to retire when they want to and the same number would like to see a pension solution that gives employees greater certainty about the final value of their pension pot. In addition, 83 per cent of employers said that they would like to have a clearer idea of what proportion of their workforce is on target to retire at a given point in time.
Unlike other approaches to DC, Guided Outcomes doesn’t rely solely on educating the employee to make informed choices. GO is a radical new approach that keeps it simple by setting a target income requirement at outset and then actively supporting employees to help them stay on-track to achieve their target.
Lee Hollingworth added: “It is important for employers to have increased information about their workforce from a business continuity perspective. Being able to track information on membership behaviour and likely outcomes, contribution and investment will aid workforce planning, improve ROI on employee benefits and boost employee engagement. It will also help employers put in place a best practice approach to DC governance. What is clear is that by working together, employees and employers can ensure that they both achieve better outcomes over the long-term.
“And it’s not just employers who have expressed a demand for this sort of solution. Two thirds of DC savers said they would sign up to a scheme whereby a target income was set and the scheme managed it for them.”
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