PENSIONS
We can see from the basic example how £95 a month goes a long way towards pension savings, but at the current AE rate of 8%, is this enough? Getting people thinking about pensions from an early age Most people don’t know how their pension pot compares to what they might want to retire on. Employers can bring to life important information on how pension contributions an individual makes now might look at retirement. It’s important for individuals to think about their retirement early and consider whether their future income will meet their lifestyle goals. Establishing savings habits early is important, and more years of additional saving at the start of working life (with effects of compounding) will help savers achieve better outcomes in retirement. Workers can visit the Pensions and Lifetime Savings Association Retirement Living Standards website (https://ow.ly/ jMGH50VfQnp) to consider their future retirement goals. The government’s forthcoming Pensions Dashboard Programme will also enable people to see all their pension pots online, helping them clearly forecast their retirement. Top tips RSM UK’s top tips for boosting financial wellbeing can help your employees plan their own financial wellbeing now and for the future, as per below. Advise staff to set time aside every month to think about finances, including future income and lifestyle goals. Their future selves will definitely thank them. Pay your pension some attention (https://ow.ly/AGKw50VfQB1) – look at what you, as an employer, offer in terms of contributions and communicate how this can help staff achieve their goals. Encourage people to review their contributions at least annually. Perhaps they’ve had a pay rise, changed circumstances or reached a new tax bracket. These milestones could be viewed as an opportunity to consider increasing pension contributions where possible. Research from Standard Life shows how increasing contributions from 8% to 12% can produce a pot worth 50% more for someone who contributes between the ages of 22 and 66. And while it may seem unrealistic paying in a larger amount from age 22, switching it to 12% later in
life can still substantially increase the pot. The relevant research can be found here: https://ow.ly/NXoA50VfQMf. The Living Wage Foundation also launched the living pension target of 12%, which requires a hike in employer contributions from 3% to 7%. But with further National Insurance and national minimum wage hikes hitting employers from April, such an increase would potentially be too much for many employers. See more about the living pension here: https://ow.ly/3C9550VfQQG. Research completed by the Resolution Foundation in 2022 showed that four in five workers, and 95% of low-paid workers, aren’t saving enough to deliver an
acceptable retirement living standard. This research can be accessed here: https:// ow.ly/EbHC50VfRbH. While employers may not be able to afford higher contributions now, what they can do is communicate more effectively with their staff. Simply providing more information to employees, and encouraging them to engage with their pensions, could significantly enhance their long-term financial wellbeing. n RSM recently delivered a webinar on pension engagement, and the importance of investing in your future. You can access the session here now: https://ow.ly/H2sM50VfRt9.
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| Professional in Payroll, Pensions and Reward |
Issue 110 | May 2025
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