PENSIONS INSIGHT
Achieving good pension outcomes
In a series of articles, Alan Morahan, managing director, DC Consulting, Punter Southall Aspire, looks at how the employers of seven fictional friends could help them achieve their retirement dreams
T his last of the series features Sneezy and Bashful, who, after not being too concerned with pension planning, are now starting to get worried about their future retirement. Sneezy Pensions haven’t always been high up on Sneezy’s list of priorities. Sneezy focused on having a family and then he experienced two long bouts of ill health. But now with his health back on track and career progressing well, he is devoting more time and effort to thinking about his future. Sneezy is worrying about retirement, especially as he’s always paid the bare minimum requirements into his pension. He’s now making amends, and has been paying an extra five per cent of his salary (on top of the required three per cent) into his current employer’s group personal pension for the last five years, albeit with two periods of absence. He realises he needs to make up the lost time, but he’s torn between living for today and planning for retirement. Plus, he’s unsure he will see much of retirement due to his health condition. He’s expecting some inheritance but his mum might need care soon, so he doesn’t know how much this might be. Sneezy doesn’t know where to start. He’s only sixteen years away from
retirement and he is unsure how much pension he has built up. Also, he has no idea how much he needs, how he can use his pension to fund his retirement or how his health condition will impact on his decision making. ...could introduce a ‘save more tomorrow’ whereby employees sign up to gradual increases in their contributions... His employers should be encouraging him to use the pension provider online retirement planning tool. Most employees rarely view their pensions online and even fewer use the retirement tools that are on offer. However, a quick look at his policy online would answer some of Sneezy’s questions and playing around with the retirement planner tool could help him understand his current position more clearly and the impact that making changes to his contributions and retirement age will have. Sneezy’s employer should think about communication with employees and discussing their expected outcomes. If the
projected outcome isn’t as expected the company needs to encourage employees to increase their contributions. Perhaps they could introduce a ‘save more tomorrow’ whereby employees sign up to gradual increases in their contributions over a period of years. Or perhaps it would be as easy as reminding employees every year the levels of contributions they are paying and showing them the cost and impact of an extra one per cent contribution – giving them a clear and hassle-free way to increase their contributions. Finally, Sneezy’s employer should think about helping employees prepare for retirement. A typical approach would be to focus on employees above a certain age and ensure they have access to relevant information and guidance and advice on all retirement income and cash options. If there are several employees nearing retirement age, offering some form of ‘at retirement support’ can be hugely beneficial to help them prepare for the transition from the world of work into retirement. After all, why allow a valued employee to build up a good retirement fund only for them to make a poor retirement decision due to a lack of information and guidance? Bashful As the sole breadwinner, with a sizeable
| Professional in Payroll, Pensions and Reward | November 2017 | Issue 35 24
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