Given the unprecedented global impact of the coronavirus crisis, much of the workforce has been financially affected. Therefore, providing financial wellbeing has never been so important, especially for those employees considering retirement.
In these most uncertain of times, employees really need help and guidance, now more than ever. This will help them make more informed decisions on their finances. So, what can employers do to help?
Reaching out in a changing environment
Recent government guidelines introducing working from home measures means that delivering financial education face to face has become impossible. Even as the rules relax, social distancing is likely to make things difficult for a period of time.
Therefore, it is important for employers to adapt to this changing environment, introducing other formats such as live webinars and telephone or video guidance calls which can be an effective alternative.
Jonathan Watts-Lay, Director at WEALTH at work, comments; “Financial education and guidance can be delivered in a number of different ways. Although the face-to-face seminar remains the most popular and effective method, especially for those considering retirement, other forms of communication are proving to be an effective alternative in this climate. Offering a range of delivery methods can also ensure the majority of employees are always supported, whatever their needs”.
Reaching out directly to those at retirement
For those who are considering retirement or about to retire, it is crucial that employees have one-to-one support through financial guidance to help them understand their retirement income options. This also helps them to understand the pitfalls to avoid including the scams out there which particularly target this group.
Financial guidance will also help employees to understand the longer term consequences and the tax implications should they decide to access their pension early, whilst continuing to work, to support what may be a reduction in their household income during the coronavirus pandemic. By explaining other options, for example accessing taxable savings they may have or looking at what other support is available, including the coronavirus initiatives created such as mortgage holidays and debt deferral, it could help them to budget more easily which could benefit their retirement plans in the future.
For those about to retire with a DC pension, given the current turbulent market conditions, some may be tempted to cash out their pension completely. This needs careful consideration as there are serious implications of doing this such as potentially generating a tax bill and transferring from a tax free environment (the pension) into what may be a taxable environment.
Jonathan Watts-Lay, Director at WEALTH at work, comments; “Whilst retirement planning is important regardless of the climate, it is particularly crucial when stock markets are volatile. It is really important that employees don’t take a knee-jerk reaction and make poor decisions. After all, it could be a decision that adversely impacts their retirement income for years to come that they may live to regret”.
