Uplift in delayed retirement forces employers to review pensions approach
Our Global Benefits Attitudes Survey, which looked at nearly 30,000 employees in 19 countries concerning health and retirement, has highlighted some interesting findings. We found that two out of every five employees in the UK are planning to delay their retirement. This trend is mirrored across almost all of the developed countries that took part in the survey.
People are increasingly concerned that they will not be able to afford to retire. As a consequence, a growing number are delaying retirement. This will inevitably have a knock on impact on employers, as workers extend their careers and the workforce ages as a result.
In the UK, younger workers concerns about their ability to retire are greater still. Some 41% of those aged over 50 believe they will retire before 65, however this falls to 33% amongst those under 30. In particular, fears over declining standards of living and Government benefits are widespread. Many lack the confidence in having sufficient resources to fund their retirement.
So what impact does this hike in retirement age have on the workplace?
Health and engagement
In general, our research found that employees expecting to work longer are less healthy, more stressed and less engaged. The following figures below put the issue into stark perspective.
Of people with an expected retirement age of 70 or older, the survey reveals that:
- 30% have poor or fair health
- 51% have high or above average workplace stress levels
- 28% are highly engaged and 34% are disengaged
Of people with expected retirement age of under 65, the survey reveals that:
- 13% have poor or fair health
- 42% have high or above average workplace stress levels
- 35% are highly engaged and 26% are disengaged
These telling statistics should provide a warning to employers. Although since the economic recovery had taken hold globally, financial satisfaction improved – undoubtedly concerns on retirement security linger. Since the survey, the result of the recent Brexit vote is now likely to keep those concerns alive for the foreseeable future. Many employees are worried about their long-term financial security in retirement and anticipate longer careers to save for their retirement.
Employees are looking to their company plans to provide for their retirement. In what ways can employers help them save for retirement when they have other competing priorities?
As short-term financial concerns for individuals ease, which we tend to see as members get older and debt repayment and house purchase become less of an issue, employees are more receptive to making plans for retirement. This should be a great opportunity for employers to get involved and support staff in planning for their retirement. But how can employers help them save for retirement?
Educate with online tools
Employers need to engage and educate their employees about their pensions early on and not wait until they are nearing retirement age. By this time, it will be too late to make up any shortfall and staff will have no option but to delay retirement.
Essentially employers can benefit from offering members a consumer experience, similar to what they face elsewhere in their day-to-day lives. The clunky old tools typically provided by pension schemes are no longer good enough. People now expect to be able to use their pension like a banking app.
Online tools can help members plan and be more engaged with their scheme much earlier in their employment. The best ones out there manage to connect with people about pensions in a meaningful, personalised way. For example, when explaining retirement saving in our LifeSight scheme, we focus on age as this resonates as a more tangible concept with ordinary people saving into their pensions. People want to know the age when they will be able to afford to retire, and what they can do to influence that age. This easy to understand tool helps close gaps in employee understanding about savings amount required and costs in retirement.
Online tools can also ensure that employees think about their pensions more regularly and aren’t just limited to once a year when pension flex choices may get locked down. Such tools are developing rapidly and employers should be talking to their advisors and providers to discuss what is available.
If employees realise they have a problem when they are 55, it is often too late. The key is to avoid surprises for members as well as being informative and engaging. It benefits no one sending each member of a pension scheme a letter in the post that isn’t read or understood and just ends up in a rubbish bin. Employers need to provide an online resource that educates and encourages each member of staff to save enough money to allow them to work until they want to stop work and empower people who want to retire earlier to plan properly to do so.
It’s all about offering choice. For people who want to retire later, it is up to employers to help them by providing an environment in which they can best contribute. The old fashioned narrow view that everyone retires at 65 just isn’t feasible any more, employers need to plan for some employees to retire earlier, some at state retirement age and some later than that.
As employees consider their options for later retirement, they will increasingly look to their employers for advice and tools to support them. It is in all organisations interests to do this in order to help keep staff morale and engagement high, mitigate risk and protect reputation.