Our recent survey amongst employers investigated what workplace support is available to help employees understand how to make the most of their finances throughout their career in order to optimise income at-retirement. It found that employees are at immense risk of retirement income shortfall. Contributor Jonathan Watts-Lay, Director, WEALTH at work.
Survey results reveal that 80 percent of employers believe their employees are not saving enough for retirement. Individuals tend to bury their head in the sand when it comes to saving for retirement but this needs to change if we are to avoid a retirement shortfall epidemic. Whilst auto-enrolment has come some way in helping employees save for retirement, it’s generally accepted that current contribution levels are not enough to create a sufficient retirement income.
Financial education is key in raising the importance of putting something aside for later life in order for employees to have adequate savings to maintain a reasonable standard of living in their retirement.”
Gliding in the wrong direction
Survey results also reveal that 33 percent of employers will still default employees to an annuity tracked glide path if no active investment choice is made. When we consider that there has been a significant fall in annuity purchase since the pension freedoms took effect, defaulting employees on an annuity glide path appears to be an ill-considered strategy.”
Lack of support at-retirement leaving employees at immense risk
Survey results reveal that 61 percent of employers believe that employees are unaware of the risks they face when accessing their retirement savings. The survey also found that 71 percent of employers do not provide a full retirement income service for employees at-retirement.
With employees blissfully unaware of the risks surrounding accessing their retirement income, many will make poor choices which ultimately means they will receive less income in retirement than they could have achieved. Worse still, this is heightened by the lack of workplace support which may result in costly mistakes such as paying too much tax, buying inappropriate products or even falling for a devious scam.
However, this doesn’t have to be the way as employers are perfectly placed to tackle this problem. Much can be learnt from forward thinking employers and trustees who are now bringing in specialist retirement providers to deliver the support employees require to achieve financial security in retirement. This includes the provision of financial education, guidance and advice to ensure employees are fully informed when facing life changing decisions about their pensions and lifetime savings. I cannot stress enough the importance of employers and trustees doing everything in their power to ensure that the right level of support is provided.