Helping your staff with retirement
Retirement is a time where most people can finally relax after a long, hard-working life. Take some holidays, indulge in hobbies, finally tackle that stack of books that's built up over the years. But it can also be a time of financial uncertainty – something that requires a great deal of planning and causes stress and anxiety for many in the years leading up to it.
There are a number of things you can do as an employer to help ease the stress of pensions and retirement for your staff, but it is important to tread carefully, and to treat these topics sensitively.
Over the last few years, the laws around pensions have changed to ensure as many people as possible have access to support later in life, beyond the state pension. A great deal of emphasis has been placed on employers, with the provision of a workplace pension now becoming mandatory for companies of all sizes.
Automatic enrolment, in which employees are added onto your organisation's pensions within three months of starting work, is being introduced slowly, with the scheme becoming universal by February 2018.
Employees over 22, earning at least £10,000 a year, and working in the UK are eligible for automatic enrolment, and employers must pay 1% of each employee's qualifying earnings into their workplace pension. Employees do not have to stay in the pension scheme, and can transfer out if they want to.
Many employees – particularly those who have had a few different jobs over the years, may well have an existing pension, and it is possible for them to transfer existing pensions into their new workplace scheme, although pension providers don't have to accept transfers.
The most important thing to remember is to encourage your employees to seek proper financial advice on what to do with their pension, rather than trying to influence their decisions. Even well-meaning advice from an employer could prove to influence a wrong decision now and then, and employees could hold you responsible.
It's important to be tactful and thoughtful when beginning to discuss retirement with staff – the Equality Act made it illegal to set a mandatory retirement age where employers are forced to retire, and approaching retirement in the wrong way could open you up to accusations of discrimination.
Even asking staff members in their early 60s if they would like to see a financial adviser about their retirement could find an organisation in breach of the Equality Act – as Ed Goodwyn, partner at law firm Pinsent Masons tells Employee Benefits:
"In this situation, the employee would be able to argue a breach by the employer of the implied duty of trust and confidence, saying ‘you have given up on me because I am old’.
"The employee could claim constructive dismissal there and then, or, more likely, would save it for if they find themselves dismissed in future and bring out the accusation then."
The answer is to make this information available to all, rather than to target it at certain people because they have reached a certain age. This could be done by signposting it on the company intranet, sending around an annual reminder email and allowing all people to access it when they need to – for more advice on this, take a look at our blog on creating employee benefits comms plans.
Understand different concerns among different demographics
Not everyone will be approaching their impending retirement in the same way – the level of security people face when they retire and stop working will depend heavily on the state of their finances. More than 40% of people in the UK are failing to save enough for their retirement, with half of that number are not currently saving anything at all.
It's important to recognise that people who haven't saved enough for their retirement probably aren’t lazy or bad with money – they may have struggled through a period of unemployment, had large medical bills at some point in their life, or simply found that the combination of rent, bills, childcare costs and so on means those few percentage points of their salary every month are just too much to spare.
With this in mind, employers need to understand that not all employees will be looking forward to retirement and the loss of their steady salary. This understanding should influence how you deal with people approaching retirement age – not everyone will be in the mood to celebrate, and not everyone will be able to stop working.
Reduce the pressure on pensions
Pensions can be stressful and, for many, it's easier to just ignore. Automatic enrolment will take a great deal of the burden away from individuals to set up and pay into their own pension, effectively allowing them to ignore their pension. But as previously discussed, the amount people save for their retirement is largely dependent on how much they earn, and what costs they run into throughout their lives.
Employers can do a great deal to help in this respect, providing a wide range of benefits that help people to save money, and improve their financial management skills. Whether this is through childcare vouchers that reduce the cost of raising children, financial education and support, or a range of other benefits that help people save money, the support of an employer can go a long way.
Organisations that provide benefits such as these are incredibly appealing to potential employees, and play a large role in retaining top talent – they create a culture where the company is actively investing in its employees, and providing support that benefits them every day of their lives.