8th December 2020
This year’s Employee Benefits Pensions Research 2020 is interesting, not least to see if employers have a different view as to the issues present due to COVID-19.
The research shows that some employees (22%) have accessed financial advice to better understand their position. However, the disruption has seen 16% of employees reducing their pension contributions, 15% opting out and 7% stopping their contributions. With household income coming under increased pressure because of the pandemic, these actions are most likely due to concerns over affordability. It may be tempting for employees to try to save money by reducing or pausing their pension contributions. However, they should plan carefully before doing this because if they can afford to continue making regular investments during a market downturn, more positive long-term returns may be generated.
According to the research, employers believe the lifetime or annual pension tax allowances have affected around 5% of employees. Nearly half (49%) of employers are not offering employees who reach the allowances any alternative to pension contributions, whilst a third (33%) are offering cash. Although this issue appears to affect a small percentage of employees, the tax implications could be very costly for some. For example, working out how close you are to the limits can be complicated and some employees may not actually realise how close they are to reaching them, and then what to do if they are.
The research has also identified the top 5 retirement concerns employers have for their employees: uncertainty about how to make the best decisions when accessing their pension benefits (68%), lack of a financial plan (59%), financial security in retirement (59%), running out of money in retirement (53%), and a lack of understanding around the tax implications of accessing a pension (50%).
Additionally, the research found that employers feel that the majority (57%) of employees are not saving enough to be comfortable in retirement and on average, with almost a fifth of employees set to retire within the next ten years, it is vital that employers take steps to help their workforce take control of their retirement savings during this uncertain period.
With this in mind, it’s positive to see that the majority of employers (79%) want to support employees in making informed decisions at retirement, and almost half (48%) see it as part of their duty of care.
Social distancing rules have meant that many employers have had to restrict attendance at face-to-face seminars and although they are a popular and effective method, providing digital solutions such as online seminars and webcasts are an engaging alternative.
Additionally, for those who need more support, virtual one-on-one guidance sessions or regulated financial advice can be delivered via a video call or the telephone. This approach is particularly useful as it offers employees the support needed to help them clarify their financial situation and gain a deeper level of knowledge around their retirement income options.
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