More than a third (36%) of employer respondents think that the pension freedoms have had an impact on how employees are choosing to exit the workplace, according to research by Barnett Waddingham and Standard Life.
Its survey of 58 UK employers, representing over 750,000 employees, also found that of the respondents who believe that pension freedoms have had an impact on how employees are choosing to exit the workplace, 10% find that staff are retiring earlier, 59% believe it is too early to tell the exact impacts, 23% see employees retiring later by moving from full-time hours to part-time hours, and 3% note employees retiring later in general.
The research also found:
- 62% of respondents have less than 5% of their employees opting out of their workplace pension, and 19% of respondents have between 5% and 7% of employees opting out.
- 67% of respondents do not believe that the increases in minimum employee contribution rates in April 2018 will increase opt-out rates.
- 85% of respondents state that pensions re-enrolment is not a catalyst for them to review their pension scheme.
- 67% of respondents provide employees with support around retirement, such as guidance, advice or an introduction to a third party.
- 21% of respondents consider the most common method of employees accessing their pension benefits following the introduction of the pension freedoms as taking the 25% tax-free cash sum and designating the remainder of the pot for drawdown. Other methods that respondents think are the most common include withdrawing the entire pot as a single cash sum (15%), withdrawing the entire pot as a series of cash sums over a short period (3%), and purchasing an annuity (2%).
- 52% of respondents would consider offering education or support tools to enhance employee engagement with pensions, including using their provider’s platform (42%), using a standalone, tailored interactive portal covering employee wellbeing in general and including wealth matters (40%), and using a standalone, personalised interactive portal that covers pensions only (13%).
- 50% of respondents are concerned that employees will no longer use their workplace pension plan or defined contribution (DC) arrangement to support themselves into retirement, in light of the pension freedoms.
- 25% of respondents do not feel responsible for assisting employees to manage their general finances, and 74% do not offer employees any facilities to help manage debt. However, 64% consider financial stress in the workplace to be an important issue.
- 50% of respondents who do offer employees facilities to help them manage debt provide employer-funded loans, and 10% offer access to competitively priced loans with repayments made through payroll.
Alan Ritchie (pictured), head of workplace strategy and commercial at Standard Life, said: “With auto-enrolment addressing low engagement and the pension freedoms demanding life-changing decision-making from people, it’s encouraging to see that engagement is firmly back on the agenda for most employers. Although meeting regulation is still a key issue for employers, it’s not at the expense of encouraging higher contributions and engaging people in their retirement savings.”
Paul Leandro, partner at Barnett Waddingham, added: “This survey has been extremely useful and talks to us about how employers are coping with the new pensions freedoms and offering their best to employees. There is a clear discrepancy between what employers want to do to support staff versus what services they actually do offer. There are many reasons for this, but the survey results suggests fatigue rather than indifference is a key reason.
“Gratifyingly we are seeing that the majority of UK [organisations] are really keen to support their employees and do the right thing in ensuring they make sensible decisions about their pension benefits. The weight of regulation weighs heavy and prevents them from acting when there are relatively simple solutions they could put in place.
“Rather than seeing the pension system as political football, the government needs to listen to employers. Our fear is that further changes to the DC pensions system will lead to disengagement of UK [organisations] from the system. If this happens the future looks more bleak for retirement saving. It is not fair to even contemplate that an employee can work for 45 years and will then have only saved enough to just get by in retirement.”