David Dodd, head of pensions at Thomsons Online Benefits
Society is changing, we’re all living longer than ever, but this is leaving employers and employees with a retirement challenge. A recent report from the ONS suggests that by 2039, the number of people eligible for the state pension in the UK will rise to 16.5 million – an increase of over 30 percent on today’s levels. Insufficient preparation will place a huge strain on public resources, and risk a decline in millions of people’s quality of life through retirement.
With this in mind, it’s more critical than ever to start thinking of financial wellbeing more broadly and more creatively than focusing on pensions alone if we want to ensure our employees across all generations are going to be retirement-ready in later life. The challenge, however, is that there are a number of factors impacting the way we prioritise and engage with our pensions, that mean this is easier said than done.
- The way people work is changing – There is no longer ‘a job for life mentality’ in the UK. It’s likely that people will have six or seven employers across their working lives; so by the time they reach retirement, they’ll have several pension pots to manage.
- Legislation is not static – The increasing real cost of pension advice, changes to tax relief, and auto-enrolment have all muddied the waters around pensions. While people are being given more autonomy and flexibility than ever, many are not being equipped to make important decisions for their future.
- Employer responsibility is shifting – The shift to auto-enrolment has triggered the demise of occupational pension schemes and the rise of contract-based DC schemes and master trusts, transferring the onus for pensions planning from the employer to the employee. This, combined with changes in the shape of the UK workforce, with a rise in zero-hour contracts and more frequent job moves, is shifting the pressure to employees to secure their own retirement outcomes.
- The growth of technology – Tech is driving change in the way people interact with their pension schemes. It’s facilitating flexibility and visibility, so that we’re likely to see pensions become more like bank accounts, which we can access whenever we want. Employers need to acknowledge and make the most of this.
Employers and employees across the board are struggling to understand and deal with these changes. The result, is an increase in financial stress among employees, with knock-on implications for businesses. Employers need to prioritise developing financial wellness across the workforce by looking beyond how they’re helping employees prepare for retirement, to how they’re helping them meet day-to-day financial challenges.
For more insight into best practice financial wellbeing and retirement programmes, sign up to our new webinar in the Benefits Experts Webinar Series What are the building blocks for better retirement outcomes on Thursday 30 November.