Almost a third (30%) of respondents to the Employee Benefits/Close Brothers Pensions research 2015 say the most frequent concern that staff have around retirement is a lack of knowledge about how much they need to contribute into their pensions in order to achieve their retirement goals.
If an employee reaches their target retirement age and finds that they do not have sufficient savings to maintain the standard of living they expect in retirement then they may financially have no choice but to remain in the workforce for longer. This can present certain challenges for employers, for example, how to attract and retain talent when there are limited prospects of career progression due to a bottleneck at the top of the talent pipeline, or how to ensure staff that work beyond the age they had envisioned doing so continue to be happy, motivated and engaged in the workplace.
A further 14% of respondents cite confusion around changes to pension legislation as a commonly expressed concern among staff thinking about retirement.
A significant number of respondents are communicating the pension flexibilities that came into effect in April 2015 to staff; 52% of respondents with defined contribution provision in place have communicated the reforms to all staff or those approaching retirement, 32% have or plan to communicate the changes to active defined benefit members or those approaching retirement, and 20% have or plan to communicate the reforms to all deferred and active scheme members.
Furthermore, 67% of respondents will use communications to support staff that will be affected by the reductions in lifetime and annual allowances, which come into force in April 2016.
However, 51% say employees have shown a partial understanding of the pension reforms and 18% report a poor level of understanding. A lack of understanding around retirement savings, whether around legislative changes, contribution levels, savings options, or where to go for advice and information, is not beneficial to employers or staff.
The pensions landscape is undergoing a period of significant change, and in light of the government’s consultations into pensions tax relief, pension transfers and financial advice, the scope for further change looms on the horizon.
Ensuring employees have a good understanding of retirement savings, and the guidance and options available to them, remains a pressing issue that shows little sign of abating any time soon.
Louise Fordham, deputy editor, Employee Benefits