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Employers must encourage staff to consider pension planning as they enter the crucial pre-retirement years.
Vital messages include how investment choices and contribution levels affect retirement income, especially for those who have moved from DB to DC plans.
Employers should use various channels, such as the internet (giving employees access to modelling tools), print and videos, but face-to-face meetings are likely to produce the best results.
Employers must keep their pension members fully briefed as they approach retirement, says Sally Hamilton
Employers with high levels of take-up in their pension scheme should not think the job is done, because many still fall short on engaging staff about pension planning, especially when members hit the age of 50 and their retirement years loom closer. Darren Laverty, a partner at employee benefits adviser Secondsight, says: “Many put their staff into the pension without advice, so it is unlikely they will worry about those nearing retirement.”
Terry Gostelow, consultant at Gallagher Employee Benefits, adds: “A lot of organisations do not do enough, but they are increasingly waking up to the fact that it is in their own interests to do a lot more.”
A key driver for employers to get on top of pre-retirement advice is the removal of the default retirement age, which will be phased out completely in October. Employees whose pensions are underfunded will be forced to stay in their jobs longer, which could make it harder for employers to recruit new talent and manage older workers’ performance.
Gostelow says: “A pension can be a route out of employment, but if employees have not got enough to retire on, they will have to continue working. Employers need to talk to staff while there is time to put this right. For the group aged 50-55 plus, communication is very important. This is the pre-retirement transition and they need to start preparing.”
Ross Jackson, head of marketing communications at pension company Aegon, says it is also important for employees to be made aware of their investment strategy in the run-up to retirement. “By age 60, they need to be out of high-risk equity and into low-risk funds,” he says. “A lot of providers remove the need to decide by offering lifestyle funds and the default funds of many schemes are lifestyle funds. Even so, members need to be sure this is the investment strategy they want.”
Laverty stresses the importance of communicating vital actions, such as increasing contribution levels and understanding the impact of investment choices and changing retirement ages, which is vital for members who have moved from a defined benefit (DB) to a defined contribution (DC) scheme.
Employers should use various channels of communication, including online (such as interactive financial modelling tools), print, video, one-to-one meetings and seminars. Gostelow says all are important, but there is no substitute for face-to-face communication.
Laverty adds: “The best way to communicate is to get 10 to 12 people into a room for interactive sessions. Some people will be more vociferous in their questioning, but this can help the shyer ones find things out.”
A key message to get across, says Jackson, is that it is never too late to contribute more into a pension. Employers could also use a segmented approach, offering one-to-one meetings for higher-paid staff with bigger pension pots, and group seminars and online information for workers with smaller pots.
Free or low-cost information is available from The Pensions Regulator (TPR) and the National Association of Pension Funds (NAPF).
Read more articles about communications around pensions and retirement