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Employers think staff will stay in work to boost retirement income

Two-thirds of employers think their staff will have to supplement their retirement income by working longer, according to the latest research by Close Brothers Asset Management, (CBAM).


When asked how their employees will cope with having to live longer on their assets in retirement, 67% said they thought they would choose to delay retiring altogether in order to ensure they had a decent income, according to the poll of 259 companies across the UK. One in nine (11%) said they believed their staff would instead choose to take more investment risk in an attempt to grow their pot, taking advantage of the flexibilities offered by the pension reforms.

However, when asked what level of understanding their staff had when it came to the pension reforms – which removed the compulsory purchase of annuities – a concerning 69% admitted their employees have shown either a poor or only partial understanding. This had led to some businesses taking action and implementing more financial education within the workplace in an attempt to ensure their staff are well-informed.

A quarter (25%) have introduced financial education seminars and webinars, allowing broader discussion of the reforms and options available. Almost one fifth (17%) are going one step further by offering their staff one-to-one financial advice, with the same amount using modellers which can allow cash-flow planning and simply the more complex aspects of financial planning. However, 15% said they were not offering any of these options, nor online information or pension clinics, leaving staff at risk of having to navigate the reforms themselves.

Jeanette Makings, Head of Financial Education Services at Close Brothers Asset Management, said: “Staying in work and delaying retirement should be a choice, not a necessity and so it’s a concern that so many employers think their staff will need to rely on this in order to fund their retirement. Beyond this, choosing to take more investment risk in the hope of driving an increased return is not something that should be done on a whim and should be approached with caution, particularly for anyone in the period ahead of taking their pension. Investments and risk are not well understood by the majority of people and so it’s important that such decisions are well informed or taken with proper guidance and advice.

With that in mind, the vast majority of employers also don’t think their staff understand the pension reforms. It is encouraging to see some are addressing this by introducing financial education programmes, from seminars to one-to-one advice, but there is still a lot to do in this space to bridge these knowledge gaps. Employers are in a great position to raise awareness and help staff to increase their understanding on pensions, wider benefits, planning towards retirement and improving their financial wellbeing. Doing this will not only benefit staff, but it also benefits the business as well.”