It’s unsurprising that employees like the freedom and choice in pensions – but that doesn’t necessarily mean they understand the implications of these new found freedoms. Whether paying too much tax, or falling for a scam, employers and trustees are realising they need to provide support.
It’s important for companies to see this as a service that is provided throughout employees’ working lives. We can then segment the workforce by career stage:
Early-career – getting in the savings habit
At this stage, employees need to understand all their savings vehicles: pensions, ISAs, share schemes etc. Employers need to help staff understand how these schemes work, what the tax implications are, and how they relate to their personal situation.
Mid-career – staying on course
By now, employees will have hopefully saved something, and financial education here is about checking they’re on course and understanding their retirement income options. And, if they’re not on track, they need help understanding how to get there.
Pre-retirement – retiring well
As employees approach retirement, we see added complexity: working out when to take retirement and what income options are best based on their individual circumstances. Employers need to ensure their staff are thinking about this from around ten years before they actually retire.
This calls for a new breed of service provision – one that educates, guides, advises and implements and manages income throughout retirement; helping to ensure the right income as needs change.
Employers and trustees are in a prime position to negotiate ‘institutional’ rates for services at-retirement in the same way they do when employees are saving into the pension. This will lead to a significant cost saving that helps to optimise retirement income, and also avoid the devastation of being scammed.