Retirement planning for employees has never been so important

21st November 2013

Regulations seem to constantly change; whether it’s the removal of the default retirement age or the options available for generating income at retirement. As more employees retire from DC schemes, or perhaps a combination of many different pension types it is now more important than ever to ensure that employees receive the right guidance.

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 worrying as the decision an individual makes at retirement is probably one of the biggest financial decisions they will ever make in their life.

In fact, poor financial choices made at retirement can often impact an employee’s income level throughout their retirement. 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. Of course annuities are not the only option, so a full understanding is needed of all the income options available.

From a recent retirement survey conducted by WEALTH at work* amongst some of the largest companies in the UK, it was revealed that employers believe that only 14% of employees are aware of the various retirement income options available and as few as 15% are aware that they no longer have to purchase an annuity.

This evidence suggests that a solution must be provided to employees to ensure they understand what their retirement options are and how to maximise their income.

It also seems that the end of fixed retirement dates will see many employees continuing in employment for longer, often opting for flexible retirement where pension income is supplemented by earnings from part-time work.

With recent changes to pensions legislation more and more employers now see professional retirement planning for their staff as critical to their business. Many employees may have a combination of pensions ranging from Defined Benefit to Defined Contribution schemes so it is important all options are understood.

A combination of financial education and advice is essential to any retirement planning programme which should be supported by internet tools and help desk support, which will ensure employees make the most of their retirement income options.

*WEALTH at work Retirement Income Options Survey Results November 2013

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