There’s a retirement savings deficit, and effective employee communication plays a crucial role in bridging the gap.
“While we work all our lives for a pension, it still may not be enough for us to live the retirement we want.” – a sobering quote from Almond Financial principal adviser Sam Robinson. Almond Financial have recently produced The Retirement Shortfall Report. The report uncovered the shocking fact that those who will rely solely on a pension when they retire are likely to face a deficit of £115,000 (on average).
The rise of the Retirement Savings Deficit
The plight of UK workers and their lack of retirement savings has gained widespread attention, with various newspapers picking up on the £115k retirement income deficit. A recent study by the Wisdom Council, The Great Retirement Study, highlighted that many have unrealistic expectations of their retirement income, yet they are reluctant to take advice to make improvements until it’s almost too late.
Employer responsibility
Employers have a significant responsibility in ensuring that their employees understand the importance of pension savings and the impact on their retirement. It’s not enough to provide a pension scheme; employers must actively offer practical advice and signposting resources that help employees assess their pension pot, estimate their likely retirement income, and make informed decisions about their financial future. This proactive approach demonstrates a commitment to employee financial wellbeing and fosters a sense of trust and loyalty.
The role of Retirement Living Standards
One valuable tool that can help employees visualise their retirement prospects based on their current pension savings is the Retirement Living Standards. Developed by industry experts, these standards outline three levels of retirement lifestyles: minimum, moderate and comfortable.
By using these benchmarks, employees can better understand what their retirement might look like and take steps to bridge the savings gap. Employers can play a pivotal role by introducing these standards to employees and incorporating them into financial education programs.
Starting the conversation…
Communicating complex financial concepts can be overwhelming, and bombarding employees with too much information can lead to disengagement. To overcome this, communication should be bite-sized, regular, and ongoing. By breaking down the information into easily digestible pieces, employees can gradually absorb and comprehend the intricacies of pension savings. Regular communication keeps the conversation alive and encourages employees to actively participate in planning for their retirement.
Communications that add value
There are things we can all do now to create foundations for a successful retirement. Consider sharing the following advice with your employees:
1Build a 35-year National Insurance record. The reason why one in three people won’t even reach the minimum income level in retirement is because they don’t have a proper National Insurance (NI) record. The Guardian states, “you will usually need to have 10 qualifying years to get any new State Pension, and 35 to get the full amount (although it does vary).” Employees can find out if they have qualifying years on gov.uk.
2Plug gaps in your NI record. This is a simple way to fill gaps in your contributions record to qualify for benefits like the State Pension. Example: pay £800 now and you could get back more than £5,500 when you retire. If you can afford to hand over £8,000, it could be over £55,000. Find out more on gov.uk.
3Hunt for private pensions. There are roughly £20bn worth of unclaimed lost pensions in the UK. Employees can find old pension plans on gov.uk or the Pension Tracing Service.
4Enrol in a pension plan. Former pensions minister Steve Webb makes a great point: “It’s worth remembering that there are, in effect, three people paying into your pension – you, your employer and the government. This means that the amount you need to pay yourself is, in effect, only half the total that needs to go in.” This is a fantastic explanation. It simplifies the complex which, as an employer, is something you must address when it comes encouraging employees to stay in and engage with their pension plans.
5Make additional contributions. Parting with more money is difficult when we’re all living through a cost-of-living crisis. However, if you’re one of the 49% of employers who offer to wholly or partially match any additional employee pension contributions, then it’s vital that you regularly share this information. It will underpin the message that you’re a responsible employer that cares for your employees’ financial future.
By providing practical advice, utilising resources such as Retirement Living Standards, and emphasising effective employee communication, organisations can empower their people to bridge the savings gap and achieve a financially secure retirement.
We’re experts at turning complex topics into simple and exciting communications that engage employees. Let us help you.
