Freedom and choice in pensions in the workplace.

Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, answers questions on if the pension reforms are changing not just the way that employees manage their money in retirement, but also their relationship with the workplace.

Are there trends towards individuals leaving the workplace earlier/going part time because of early access to pensions? 

We do not have any statistical evidence to support this. In fact there is a suggestion some are cashing in part of their pension whilst still working, consequently the real danger is that they will need to work longer having depleted part of their pension provision or be that bit poorer in retirement.

What part does the lifetime allowance play in this (ie are people leaving the workforce because they can no longer benefit from company pensions)?

This is unlikely as many employees will get cash in lieu of employer pension contributions. Many are also happy to exceed the lifetime allowance, albeit they will receive an additional tax charge.

Is the ageing workforce a sign that people can’t afford to retire and are therefore staying in work longer – or are people working longer because they want to?

Again we do not have any statistical data to support this one way or the other but we do have evidence from employers that we work with that some employees will work longer due to poor pension provision. In addition certain employers face specific skill shortages and would like key workers to stay employed longer albeit they could afford to retire.

Do we need a mid-life MOT (similar to that proposed by the PLSA) or is even mid-life too late? 

It is certainly important to take a ‘rain check’ mid-career to see if pension savings are on target and meet an individual’s expectations. On the basis they may have been in work 20 years or so and have another 20 years to go, this gives time to adjust savings to hit their required retirement income.

Do HR/reward departments know enough about how the pension reforms are affecting their staff, and what changes have/are they making to ensure they better understand the workforce and can predict their future behaviour? 

We are seeing considerable developments in this area where employers and trustees are looking for specialists who can provide financial education, guidance and advice to employees/members and then ensure they can easily implement their chosen retirement income whether that is via drawdown, annuity, phased retirement or a combination. There are an increasing number of tenders being issued to firms like WEALTH at work to deliver these services.