Education may be key to pension scheme success | Incentive&Motivation

 Employee Benefits News: Education may be key to pension scheme success | Incentive&Motivation

How are you helping your employees get the most out of their pension now that they represent one of millions who have signed up from AE (automatic enrollment) – do they know what they bank now represents for their future selves and the lifestyle this will afford them?

It seems like a tough conversation to have, but businesses need to think seriously about helping people take a look at where their contributions are taking them.   After all, the long-term success of the current workplace pension regime relies on the provision of financial education and guidance to persuade individuals of the merits of saving more for their retirement.

Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace, thinks there are real benefits of looking beyond the ‘wins’ of getting people signed up for a pension; “We welcome the news that more than eight million employees have signed up for a workplace pension since the launch of automatic enrollment in October 2012, and that the annual total amount saved by eligible savers was £87.1 billion in 2016 – an increase of £3.8 billion on the total amount saved in 2015.

Financial education and guidance delivered in the workplace is crucial to help individuals set and achieve their financial goals, giving them more control over their finances, and ultimately their retirement plans in the future.

It’s easy to get carried away with the small successes of auto-enrolment, rather than focus on the work that still needs to be done to encourage individuals to save more for their retirement.”

Minimums set to increase

He continues; “The minimum contribution rate for defined contribution pension schemes, personal pension schemes and some hybrid schemes is being phased in over time and will increase from a minimum of 2% overall (with at least 1% from the employer) to a minimum of 5% overall (with at least 2% from the employer) in April 2018.

Minimum contribution rates will increase again in April 2019 to a minimum of 8% total (with at least 3% from employers). But this is far below the contribution levels required by many individuals to enjoy a comfortable retirement.

As much as auto-enrolment is a positive step, there is clearly still a long way to go until we are at a stage where the majority of employees are producing adequate savings for financial security at-retirement.”

Watts-Lay adds; “Retirement might seem a long way off for many, but individuals really need to think about how they are going to fund their future income as early as possible, to get a better understanding of what they need to be doing now.

Saving more now or working longer than planned could make a real difference to retirement income and the value of well thought out planning from early on should not be underestimated.

Financial education and guidance delivered in the workplace is crucial to help individuals set and achieve their financial goals, giving them more control over their finances, and ultimately their retirement plans in the future.

It is only when this is delivered and individuals genuinely understand the long-term benefits of saving more for retirement that auto-enrolment can be considered a true success.

We urge individuals to demand more retirement-related support from their employers and we call on business leaders to step up and respond to these demands, not least because they are fully aware of the issues at hand.

As WEALTH at work research found, only one in 10 (10%) UK employers believe that their employees are saving enough for their retirement.” A shocking stat – but it’s clear that there are steps you can take.

We would recommend you speak to the team at WEALTH at work, a businessi which provides independent financial advice and discretionary investment management services.

The group specialises in providing financial education, guidance and regulated advice in order to implement and manage investment planning solutions for individuals approaching or in retirement.

These services help individuals ensure that their investments are appropriately managed by;

  • Creating investment strategies that meet personal objectives which are flexible enough to adapt to changing needs
  • Investing in the whole-of-the-market
  • Actively managing investments so they continue to remain appropriate through changing market conditions

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