Financial Education – an essential tool when employees retire

In these challenging economic times, with the introduction of many new regulations such as auto enrolment, removal of the default retirement age and enhanced options at retirement, employers and employees are often overwhelmed with the vast considerations which critically need to be understood.

Together with insufficient retirement savings, over indebtedness and a general lack of knowledge – employees have a pressing need for financial education in the workplace.

This is of special concern for those considering retirement. Employees save for many years to fund their retirement income but are often left without any guidance at the point of retirement. This is especially important as the decision an individual makes at retirement is probably one of the biggest financial decisions they will ever make in their life. WEALTH at work has helped employees from many companies to understand not only their options at retirement but also to help them to understand how retirement income can be maximised whether the income is generated through an annuity, drawdown or perhaps a combination of both. For example, ABI (Association of British Insurers) figures show that a third of people do not shop around for an annuity when they reach retirement and, as a result, may be missing out on a higher income, potentially losing thousands of pounds over the course of their retirement. Other studies suggest that up to 60% of people buying an annuity could have received more income had they shopped around or received enhanced annuity income due to poor health or lifestyle factors.

Increasingly it is important to receive advice at retirement as income in retirement may not just come from pension but other assets such as shares received through employment or perhaps other savings gathered outside the workplace. It is important that all savings are considered to determine the best option or options for each individual.

Many leading companies now realise that the provision of financial education supported by advice is critical in the lead up to retirement. A recent survey of employers conducted by WEALTH at work showed that only 18% of employees were believed to be aware of the various income options available to them at retirement. It goes without saying that this is a big concern given that after many years of saving into the company pension employees are left without guidance at the point they really need it i.e. when they want to turn pension savings into an income.

Both employers and employees need to rethink retirement now if value is to be maximised.  It is essential that employees receive financial education and suitable guidance in the workplace to understand their choices, what can be achieved and consequently make informed decisions.

If you would like to find out more about how you can help employees in your organistion who are approaching retirement please contact us.

Please see Financial Education – an essential tool when employees retire PDF to learn more.

 

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