Are you doing enough to help your employees save for retirement?
Providing a pension that provides a comfortable retirement incomeOther than Defined Benefit pension schemes, which have rapidly declined in recent years, there are few pension schemes that could claim to provide “a comfortable retirement income”. Given that many employees remain on the minimum possible contribution and the low engagement with pensions generally, it’s likely that your employees are not saving enough for retirement.
You may provide your employees with the potential, but just providing the benefit is not going to help them achieve a comfortable income in retirement.
Auto-Enrolment is just the beginningIt’s not enough to automatically-enrol your employees and think that the job is done. You may even send out a few regular communications about the pension benefit that you offer, but do you really think this is going to help them get the “comfortable retirement” they want and deserve?
Your employees need to be clearly told that saving the minimum contribution is unlikely to help them accrue the savings they need to retire at 55 or even 65. It’s also important for them to understand that there are more considerations beyond their contribution rate. They need to consider the investment fund they choose, the date they might want to retire and so the amount of risk they want to take and when. What’s more is that planning finances for retirement needs to form part of a larger picture of managing finances across the whole of an employee’s career. For example, if an individual has debts they need to pay off, it’s likely to be best in the long term to pay those debts off first with any savings before starting to save for the future, because interest that grows on debts can often be much higher than the interest earned on savings.
What can you do?It’s important to get your employees saving as much as they can realistically afford as soon as possible, taking all of their financial responsibilities into account. It should be the mind-set of every one of your young, new employees to set a little aside every month into their pension to prepare for the future if they can. The later an employee starts to save, the harder it will be to catch up later on when they realise they need or want more. A better understanding of what they need and what would be a “comfortable retirement income” for them comes from looking at all aspects of retirement – not just finances but their lifestyle too.
Education around your pension benefit and the options available, as well as planning for retirement, is the minimum you could do to support your employees through this major transition. Helping your employees get on the right track early on in their careers benefits them through the whole of their life, not just at retirement. And supporting your employees with their finances is beneficial for your business too – read our post on financially stable employees to find out more.
Speak to your usual Jelf consultant for more information, or visit our Workplace Retirement Support section.