The changing retirement needs of the workforce
Preparing to work for longer is increasingly a part of life for most – but that doesn’t mean it’s easy. With trying to make short-term ends meet, the expectation of working well into our 70s means that retirement planning is firmly taking a back seat for many UK workers. This was emphasised in our recent research which showed that retirement saving is only seventh in a ranking of employees’ financial concerns, with general household costs, general savings, housing costs and leisure considered the top priorities.
So how can the pension industry and employers help to keep people on their retirement path, even if it is so far off? First, we need to understand both attitudes to a longer working life, and the financial priorities of workers today.
Working for longer
Seven years ago, only 17% of surveyed employees expected to retire in their 70s. Fast forward to 2017, and that number has almost doubled to 32%. Perhaps unsurprisingly, this increase in expected retirement age is more prominent amongst younger employees. Of those surveyed under the age of 30, 44% expect to retire in their 70s, compared to 20% of those in their 50s.
The younger generation also has a more negative attitude towards retirement with 70% saying that they are likely to be much worse off in retirement than their parents’ generation. This is perhaps unsurprising given that they are set to be in work longer than their predecessors and understanding that they won’t get a defined benefit pension .
The impact on personal lives
The ageing workforce doesn’t only affect our expected retirement age, it also has a knock-on effect on other areas of workers lives. Those expecting to work longer feel more stressed, less healthy and less engaged with their jobs.
Employees are not aware that later retirement is not in of itself a bad thing as many studies have shown that there are numerous benefits associated with working longer. For example, boosting cognitive health, according to a study by Colombia University.
However, problems arise when those who are expecting to retire later are not doing so out of choice. This adds an extra layer of stress to their lives, and a decreased interest in their jobs; leading to a drop-in engagement. This is not just problematic for individuals, but also for businesses. Employers will benefit from engaging their experienced talent in the right way to create a happy and consequently productive workforce.
Two-thirds (69%) of respondents say that their workplace pension plan is the main way they are saving for retirement highlighting the key role for the employer to ensure their communication helps their employees understand where their savings in going, and what that means for their retirement plans. One-way businesses can do that is to ensure that their benefit programmes are fit to support an older workforce and provide a productive transition into retirement. Creating an environment where workers feel comfortable discussing their needs and options as they near retirement age, such as flexible working arrangements and upskilling, is important.
Employers will get a good return on an investment in communicating effectively with their employees about the options available to them and the importance of long-term savings. It is also an opportunity not just to ensure that workers are getting an engaging member experience that encourages them to save and make this a competitive differentiator for their business.
Employers can help their employees effectively plan for their retirement by helping them access the right tools. This will not only help ensure that people can retire when they want, but that they are productive employees for as long as they choose to be part of the workforce.