Between 2010 and 2012, just 43% of UK adults were contributing to a private pension. By 2018, that figure had risen to 53%, showing that more and more people were starting to plan for their retirement. However, because of the pandemic, this upward trend is faltering of late.
It’s been reported that the COVID-19 outbreak has caused around 20% of workers to delay retirement plans. There are a number of different reasons why. Some people are facing reduced hours and pay cuts, or worried about the risk of redundancy and have reduced their pensions contributions accordingly.
Others are concerned about volatile pension pot values, or even increased outgoings. After all, while commuting costs may have gone down, 1 in 5 say they’re spending more on Zoom classes, 24% are spending more on hobbies, and more than half have seen an increase on groceries.
Ultimately, whatever the reason, it is clear that the pandemic is making people rethink what they want in terms of retirement, or rethinking what options are possible for them.
But perhaps even more worrying than the fact that so many are feeling as though they have to delay their retirement, is the number of workers that simply don’t know whether they have to delay their plans or not. A survey by LV= suggests that just 14% of savers have looked at their pension value over the past 12 months (despite statements continuing to be sent as normal over lockdown). Employees are actively avoiding facing the truth.
And so it’s abundantly clear that financial guidance in the workplace is important, now more than ever. Employees need to feel more in control of their pensions. They need to feel in control of their own finances. They need to face the situation head on, armed with the information and support they need to manage their pension savings effectively, and make the best decisions for themselves, their families, and their future.
Auto-enrolment, which was phased in between 2012 and 2018, has been a big help in empowering employees, but during this particularly difficult time, more needs to be done.
Right now, employers should be looking more closely at educating their employees about their options, helping them to understand how the pandemic may have affected plans, and ensuring they prepare early to achieve positive outcomes.
For example, those who reduced their pension contributions at the start of the pandemic must be encouraged to increase them once in a more stable work situation.
The truth is that there are a lot of questions that employees are asking themselves right now, and these questions will largely vary depending on how close the individual is to the age they’d planned to retire at. The average 40-year old worker, for example, may be asking whether they’re still on track to retire at the age they’d envisioned. They may also be asking themselves whether they need to be putting more into their savings pot in order to retire ‘on time’, or if they’re investing their money with the right banks.
On the other hand, the average 50-60 year old may be asking whether it’s worth holding out to their planned retirement age, or if they’d be better off drawing their pension now. Reports show that nearly 155,000 workers between the ages of 55-64 could feel ‘pushed’ into early retirement by the stress and uncertainty of the pandemic. They may also be asking if they should take the 25% tax-free cash and, if so, whether to take it as a lump sum, or make smaller withdrawals over a slightly longer period.
How can employers help their people find the right answers to their questions, and give them the information they need to make informed decisions? It can sometimes be a little tricky - especially when every individual has a different financial situation and a different question that they’re asking - but digital tools such as MyEva can help.
Digital tools for supporting savers
MyEva can help employees to first envisage the lifestyle they want in retirement, then find out how much they will need to save to fund such a lifestyle, and recognise where - and when to take action. This helps ensure that every single employee can gain a full picture of their finances, understand the best way to get on track - and stay on track - during this particularly difficult financial period.
Empowering employees to feel in control of their retirement is one of the biggest contributors to better employee wellbeing. It opens up doors, helping employees to make choices that may make them feel happier, healthier, and more satisfied in the workplace (and, as we all know, a happy employee is a productive employee).
For example, some might realise that they could move from a full time position to a part time position without impacting retirement plans, giving them a more balanced work/home life. Others may discover that their plans to retire early aren’t feasible, and they may have to work for longer, but it’s OK because they recognise this now, and can adapt their plans accordingly. The earlier employees know the situation, the better.
It's all about putting employees in control of their own future and retirement lifestyle.