Challenges for employers in 2017.

6th February 2017

Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice discusses the challenges for employers in 2017.

Data from the ABI shows that in Q1 of 2016, 695 people cashed out pension pots worth more than £100k in full: meaning that they would likely end up paying huge sums in tax. The question is, did they realise the tax implication, or was it a nasty surprise? It does suggest there are some people taking actions which are unnecessarily costly to them.

Also, as with the issues around pension cold calling and scamming, it is a common misconception that it’s fundamentally an employee/member consideration: but what should and could employers and trustees be doing?

At present it is only the most innovative employers and trustees who are realising the benefits of supporting employees with the issues they face at-retirement. But as we move into 2017, employers need to look at undertaking due diligence on providers, and finding companies who can offer a full service for employees at-retirement. This includes; financial education – helping employees to understand the pros and cons of each retirement income option; regulated advice to provide individual support; and also help with the implementation of their chosen option in a tax efficient way – whether employees decide to buy an annuity, go into drawdown or simply make cash withdrawals.

The big win in this is that employers/trustees use their buying power to put in place an appropriate service, whilst ensuring the member can benefit from lower costs throughout retirement. In other words, it does not need to have a direct cost impact on the employer/trustee but the member can benefit from lower costs and a better service in-retirement.

Some employers are struggling with the question of whether retirement is their issue or not, or whether it is just their responsibility to run the pension scheme. If an employee has saved into a pension for forty years, and are at the point where they want to turn their savings into an income, why wouldn’t you want to help them? After all, the last thing an employer really wants is for one of their employees to make a bad decision and be unable to afford to retire.

Further coverage can be found in Employee Benefits and Reward.

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