Are your employees abandoned when they want to turn their pension into retirement income?

26th March 2014

From a recent survey conducted by WEALTH at work, it was revealed that only 13% of employers believe their employees are making sufficient retirement savings. And those that are saving might not be making the most out of turning their pension savings into retirement income, as only 14% are aware of the various retirement income options.

Jonathan Watts-Lay, Director, WEALTH at work, comments, “These figures are shockingly low. Therefore, it is critical that companies offer financial education to ensure employees save towards their retirement and understand the various retirement income options available to them at the point of retirement. As more employees retire from defined contribution (DC) plans it is becoming ever more apparent that having a comfortable retirement is not just about the level of pension contributions or the funds selected but what is actually done with the pension pot when retiring as this can significantly impact the level of income which is generated.”

He adds “It was welcome news in last week’s Budget that from April 2015 those retiring from DC schemes will be able to decide how they want to draw an income from their pension pot. However, increased choice and flexibility means that individuals need to understand the options available to them, the advantages and disadvantages of those options and ultimately, what is the right thing for them to do on a personal basis.”

The survey results also show that only 23% of employers believe their employees consider their total wealth as part of their retirement planning.

Watts-Lay adds, “It is important to consider all savings and assets, and not just pension when making decisions at retirement. Consideration also needs to be given to wealth held by partners as this can influence decisions. It is vitally important that after what may have been a lifetime of saving, employees know what the options are, know the advantages and disadvantages of these options and are able to access advice to ensure they are making the correct decisions. Decisions at retirement are for most one of the biggest financial decision of their life so it is important employers and trustees consider the provision of financial education and advice. If they do not there is a danger that employees will end up in a poorer position than perhaps they needed to.”

The research also revealed that 83% of employers consider professional retirement planning including education to be a critical need for their employees.

University of Lincoln provides an education programme for their employees. Professor Ted Fuller, Faculty Director of Research, University of Lincoln agrees, “Personal financial knowledge and responsibility should be a part of everyone’s education. Our retirement planning programme provided by WEALTH at work is offered as part of our employee benefits and has been influential in helping employees in the years leading up to retirement to ensure a secure financial future.”

To learn more about our survey results, please click here.