Saturday, 21 October 2017

    Getting at-retirement financial planning right

    How can employers help their workforces plan for life after work?

    We invited industry experts to give their thoughts on how employers can help their workforces plan for retirement and, as part of that, improve overall financial awareness.

    The panel:

    CR: Craig Rimmer, policy and technical specialist, The Pensions Advisory Service (TPAS) (pictured, left)

    IH: Ian Hodson, head of reward, University of Lincoln (centre)

    JWL: Jonathan Watts-Lay, director at WEALTH at work (right

    What can government, employers and individuals themselves do to improve at-retirement planning?

    CR Employers can help with financial capability generally, to get their workforce thinking about their aspirations, their world post-work and how they can plan for that. We run the risk that some people become the JAM (Just About Managing) of tomorrow, because they’re not saving enough for their future provision.

    IH First, employers must identify whether financial education and wellbeing – including the transition to retirement – is an important part of their strategy. In our case, it’s about having clear dialogue, succession planning and talent management and, for individuals, talking through what their retirement plans look like.

    Having clear ideas about workforce movement really matters to us. Once you decide that you need this, the big challenge is getting the communications and marketing right. It can be quite hard to co-ordinate as an organisation because the required knowledge might come from many different places, such as HR, payroll and pensions. In some organisations, that cross-departmental working doesn’t happen.

    You have to accept you’ll need to work with third parties – and that those third parties may be where you ultimately direct individuals. Employers mustn’t be afraid to link in with professionals who can do the things that we can’t. Sometimes you ask an employer: ‘What does financial education about retirement planning look like?’ and they’ll say: ‘We’ve a page on our intranet for it’. But it has to be something you promote as a benefit. I genuinely believe that people value financial education programmes as a part of their reward package.

    JWL There’s a shared objective between the employer and the employee, because most employers will say: ‘Of course we want people to be able to retire at a reasonable age’, and most employees have a wish to retire at some point. What is the journey that the employer and the employee will go on to ensure this shared objective is met? We know putting information on intranet sites or handing out leaflets just doesn’t work. It has to be education as opposed to information, because education is interactive, it’s a learning exercise; you’re going to know something at the end you didn’t know at the beginning.

    In terms of what the government can do, clearly they’ve already taken some steps. Allowing people to take money from their pensions to pay for advice is important. The government has also now started to understand that this needs to be holistic advice, about assets that people hold in the round rather than just their pension. Bringing together the Money Advice Service, Pension Wise and The Pensions Advisory Service supports that. Employers and trustees are increasingly looking to appoint providers of financial education, regulated advice and those who can implement all income options for employees retiring. This is the biggest area of growth for our business as it helps manage the risk for employer, employee and trustee.

    What changes would you make to improve at-retirement financial wellbeing?

    IH - Businesses need to better understand that financial education is about lifelong learning, not something that suddenly appears at the point of retirement. It’s almost too late then, there’s no opportunity to layer the learning, to build on the decision making and allow people to have those decision tangents throughout their career.

    It’s easy to forget that finances can be a very sensitive area and we have to look at how we tackle that. We still have people who will just bury their head in the sand and not see why they should start planning their finances in the early part of their career, even if that is just forming habits of saving.

    JWL One of the big areas of concern I have in pensions specifically, is that some in-house scheme trustees have been slow to wake up to the fact that they have a responsibility for people at retirement. That to me is a barrier. The trustee role is not just about accumulation but what happens at the point of the retirement. This has started to change, but needs to go a lot further.

    CR Maybe we need to be more innovative in the workplace, using tools like auto-escalation, so when employees get a pay rise they consider giving some of that extra money to their pension provision.

    People can become anchored, and auto-enrolment has an element of that. At present, the minimum contribution is 1%, so people are thinking: ‘The government is telling me to save 1%, so that’s enough.’ It will still be the same when the minimum contributions increase, eventually to 5%. People will think that that will be enough to get them where they need to be. It requires innovation, possibly at a payroll level, that will ultimately help people save more towards their retirement. 

    What sort of information, advice and support are you finding people need?

    IH We’ve got an embedded financial education programme, but the big challenge is the content is quite broad. It’s underpinned by understanding pension savings vehicles, taxation and then widens out into other aspects, such as will writing and even down to our students’ financial education programme.

    There’s a lot of information, and because of the changes to state pension and the removal of the default retirement age, there’s now more decision-making to take. In the past, people would often just retire because it was just seen as the socially done thing. Whereas now it’s not, it’s their decision as to when it happens. We find ourselves supporting people not only on the guidance around pensions and planning finances after retirement, but equally around modern workplace concepts such as flexible and phased approaches to retirement.

    I sense apprehension from people, often because of massive changes to longevity. There’s a nervousness about: ‘Is it too early? Can I actually afford to support myself for such a long period of time?’ We are seeing more people wanting to talk about a phased approach and almost dipping their toe into the water.

    CR It is definitely about education. Employers can intervene in terms of financial capability generally, and maybe that can be part of their wellbeing strategy. Encouraging staff to think about their aspirations is important - whether that’s to maximise retirement income or to consider a capital purchase of some type, get them thinking about the world post-work and starting to plan for that.

    It’s about making people aware of advice services, including The Pension Advisory Service, as well as getting them thinking about their retirement on a regular basis.

    This story first appeared in Reward magazine’s wellbeing research report.  Click here to read the full report

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