In a new report, Spotlight on UK financial wellbeing, Close Brothers’ Workplace Financial Wellbeing Services shines a light on the current state of retirement in the UK.
The research reveals that for many UK employees, decisions around retirement are laden with confusion, indecision and anxiety, and this indecision is negatively impacting businesses.
The pandemic, and the subsequent economic uncertainty has resulted in greater insecurity around retirement. Almost a quarter of all employees (23%) have changed their retirement date recently, with 18% deferring it.
Those approaching retirement are even more likely to have made changes to their plans; over one in three (36%) of employees aged 55+ have changed their retirement date, with most deferring it (32%).
One in 10 (9%) are currently “undecided, uncertain and anxious”. Of those over 55s who pushed their retirement date back, it’s because they simply cannot afford it right now. Conversely, of those in the same group who have brought their retirement date forward, most cite that ‘life is too short’ (47%).
Retirement planning falling by the wayside
Not being able to afford to retire is one of the most common financial concerns, with one in three (35%) employees across the country saying it’s front of mind. This jumps significantly to 41% of employees aged 55+.
Because of this uncertainty, retirement planning is also falling by the wayside. One in four (25%) employees admit their retirement plans are not on track, while one in 10 (10%) say they have no retirement plans at all. Worryingly, 27% of employees over the age of 55 feel their retirement plans are not on track currently.
The knock-on effect of retirement uncertainties
This ongoing uncertainty around retirement is having consequences within businesses, which could have cost and retention impacts over time.
Companies are currently experiencing blocks on succession (22%), and while companies do value retaining experienced workers (28%), there are some side-effects in engaging a higher proportion of senior workers for longer, with a higher average payroll (23%) and an increase in healthcare costs (18%).
Companies are also experiencing difficulties in recruitment and talent development (30%), because there isn’t the turnover of senior personnel necessary to incentivise young, talented staff members.
Wanting to plan for retirement but not knowing how
Amongst employees, there is appetite to get plans in place, but it’s about knowing where to start. When it comes to retirement, for 21%, understanding their choices and knowing how to make a good decision is key when it comes to planning.
Half (54%) of employees say that knowing whether they would actually be able to afford to retire and if so when, would bring a real sense of security; this is particularly the case for women (66%) who want that certainty.
Disconnect between employees and employers
The heart of the problem is a disconnect between what employees want and need to effectively plan for retirement, and what’s being provided by companies.
Nearly half (43%) of employees want pension advice, but only a small number of companies offer it; just 22% of organisations offer financial advice with a pension provider, 17% offer financial advice with a financial education provider and just 16% give pre-retirement seminars.
Other help geared towards retirement planning is currently offered by even fewer companies: only 13% provide a helpline to a pension provider and only 9% offer a talk from a workplace pension team.
Jeanette Makings, Head of Workplace Financial Wellbeing said, “Our report shows that anxiety has increased significantly when it comes to retirement decisions. It’s a weighty responsibility and the impact of getting it wrong is immense; it’s understandable people are feeling the pressure.
“And now, with the possibility of a one pot pension, and yet more control being put into the hands of employees, the need for support, guidance and advice has never been more critical.
“The good news is that there are some simple solutions and employers are perfectly placed to help. The biggest swing factor is affordability; more than half (54%) of employees say that knowing they could afford to retire, and when, would bring certainty and security.
The other biggest drivers, within employees’ control, are knowing what they will get in their State Pension (25%), paying off their mortgage (29%) and understanding their choices and making better decisions.
Employers, as part of the support provided in their financial wellbeing programme can easily help with all of these: providing a financial education programme, financial guidance and access to financial advice; linking to a pension savings tool, the State Pension forecast and a budget modeller alongside some guidance on living standards in retirement; and introducing a mortgage advice service, to help employees reduce their mortgage burden.”
