More workers are saving for their retirement, but many still need quality education and guidance, says Ann Flynn, head of marketing communications, corporate pensions at Scottish Widows
The recession has had an impact on all of us. Many feel worse off than they did five years ago, while others are making more commitment to short and long-term savings.
The Scottish Widows UK Pensions Report 2009 shows a rise in the savings index to 54%, up on last year’s 51%.The number of men and women saving has increased steadily over the past three years, but although 54% who are
saving are doing enough to achieve an adequate retirement, one-fifth of us are still not saving at all.
What makes people save? Or, rather, what stops them saving? The Scottish Widows Workplace Research 2008 showed that workers’ number one need is access to quality education, guidance and advice to help them make the right decisions about their long-term financial management. This was supported in the Pensions Report 2009, where 43% of employees expect their employer to facilitate access to general information, while 33% want full financial advice.
For many (87%), online access to education and guidance is the preferred route. Workers also want to be able to see and manage their savings online.
Overall, workers feel worse off than they did five years ago and for some, saving for the short term is the priority.
Importance of trust
Our Workplace Research also revealed the importance of trust. The recession has led to workers losing trust in the security of savings. Their trust in financial institutions has also fallen because of the financial climate. However, the Pensions Report shows that workers do trust their employers and many enjoy access to employer-sponsored pensions and see this as a major incentive to save. A quality company pension scheme is a key factor for just under half of workers moving jobs and 54% of staff say their workplace pension scheme is an incentive to stay with their employer. So why are so many still not preparing for retirement?
The lack of confidence in equity markets has led many workers to view other ‘tax-wrappers’ as ‘safe’ savings and
investment products. More than 70% of workers say cash individual savings accounts (Isas) are very or quite safe and 38% see these as a route to a reasonable standard of living in retirement.
This shows workers are looking more widely at how they prepare for retirement and a pension is not seen as the only solution. The important issue is that people use a combination of savings vehicles to achieve their short- and long-term aspirations. Using only a cash Isa for retirement planning could be high-risk for those under 30.
Helping workers understand how to go about saving and providing access to quality education and guidance are key factors for employers. So it sounds easy: give access to quality online education and guidance, combined with products workers can understand, and everyone will start saving.
That is unlikely, but by removing some of the barriers to saving and helping staff understand simple facts and appreciate the benefits their employer provides could be a starting point. It is vital to ensure the education and guidance is appropriate for the audience, and to keep it simple, with relevant and appropriate language. We know employers are concerned about employees not appreciating the benefits offered. And in the current climate, employers are seeing workers stressed by money worries.
Compelling engagement programmes will help employers achieve their business objective by encouraging staff to become more involved with their finances. Some employers we spoke to for the Scottish Widows Workplace Communications Research October 2009 have advocated allowing staff time at work to manage their finances, thus reducing stress and improving productivity.
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