The combination of changing retirement legislation and a lack of employee pension savings means employers are being faced with the inevitability of an ageing workforce. David Piltz, Head of Trustee Services, shares his views on how this might impact employee benefits packages.
Until October 2011, an employer could compulsorily retire employees at 65. In the run up to this, a number of employers pre-empted the legislation and retired elderly workers whilst it was still legal to do so. At the time, Longleat hit the headlines for retiring all their staff who had reached 65. These included 18 workers over 70, seven over the age of 75 and two members of staff in their 80s. On that occasion, Longleat said it was undergoing a “modernisation programme” and it was “inevitable that we require people with new diverse skills and experience”.
Employee Benefits recently published the results of a survey it has undertaken, which unsurprisingly show 67% of respondents believe staff will have to work longer to rely on current assets in retirement. Employers
are going to have to accept the implications of their workforce increasing in average age even if they take steps now to mitigate the issues. The decline in final salary pension arrangements, and the increase in the age at which state pension is paid, will increasingly mean today’s employees won’t be able to retire at the same age as their parents did.
Employers can’t stop staff working to their 70s and 80s, but they can take steps to at least ensure that lack of finance doesn’t leave them with an aged disgruntled workforce who would like to retire but can’t afford to do so. Increasing employer contributions to their defined contribution pension scheme arrangements is one option, but so is better education of the workforce on pensions issues. Some 30% of respondents to the above
survey said their most frequent concern that staff have around retirement is the lack of knowledge about how much they need to contribute into their pension in order to achieve their retirement goals. There is also more work to be done around pension scheme investments, and in particular default funds, if members are to achieve what the Regulator increasingly optimistically calls “good outcomes”.
How are you going to attract new talent if there’s a bottleneck of older workers who show no signs of retiring? Also, how are you going to ensure the staff who are working into their 70s are motivated, productive and happy and not simply working their ticket until they do have enough money to retire on?
As an employer, even if you are taking steps to mitigate the issue, an ageing workforce is almost inevitable and it would be wise to start taking steps now in recognition of this. Inevitably, the older you get, the more healthcare issues are likely to be an issue. Moreover, many benefits which traditionally make up an employee benefit package, such as childcare and the cycle to work scheme, may seem less attractive to those workers in their 80s. So, as well as reviewing your pension provision, you should be looking at your employee package as a whole with at least one eye on the horizon. Employers may increasingly have to think outside the box and come up with new solutions… and I don’t mean feeding elderly workers to the lions.