- Employees should ensure they fully understand retirement options to avoid ones unsuitable for their needs.
- Useful benefits include tailored financial coaching, interactive calculators or retirement planning apps.
- It is important to ensure employees are aware of relevant benefits as early as possible so they can prepare for retirement.
Less than a fifth (17%) of 55 to 64-year olds have a clear set of retirement financial goals and budget, and 19% have considered a serious illness in their retirement plan, according to Barnett Waddingham’s December 2024 At retirement reckoning report. So, how can employers ensure that they are offering employees relevant support for all aspects of retirement saving and planning?
Hidden retirement planning costs
Without adequate preparation, employees may have a shock when considering their finances in retirement. It is crucial they understand their budget and what this will look like post-retirement, as well as any hidden costs.
Some hidden costs or mistakes when planning can happen before employees even reach retirement, explains James Smith, client director at Hymans Robertson Personal Wealth. “Poor tax planning can lead to significant losses without them realising it,” he says. ”When retiring, a common pitfall is leaving large sums in cash, allowing inflation to erode their value. Employers should help their staff not only understand these risks, but also prepare for them, by raising awareness, offering solutions and ensuring they have the right support.”
A lack of planning can stem from not fully understanding the options available, which could lead to choosing ones that may be unsuitable for individual needs. Staff might also pay for expensive financial advice, when free resources could have sufficed.
Poor understanding could also lead to accepting standard annuity payments, which may not provide employees with what they need in retirement, says Katie Vye, head of Better with Money. “Exercising the open market option gives the freedom to shop around for a retirement income product that best suits employees and their pension savings, she explains. “With the tax relief that sits around pensions, a retirement income product can be a highly strategic investment vehicle for tax-planning purposes that provides education leading up to retirement to support employees.”
Another hidden cost can emerge by some employees opting to cash out a pension as a lump sum, which can push them into a higher tax bracket.
Marie Blood, associate and senior DC consultant at Barnett Waddingham, says: “Employers can ensure employees are aware of the tax implications of withdrawing funds and helping them plan to avoid this. Many providers will have information guides available and some have developed calculators to explain the implications and help with planning.”
Financial support
Employers can play a vital role in supporting with retirement planning and managing employees’ financial future by making it relatable and practical. The focus should be on clarity, rather than complexity, and building confidence.
“Employers can give employees access to online, on-demand financial education content, which clearly explains retirement options,” says Vye. ”From there, they can be more active in creating a culture of openness and proactive support by having onsite pre-retirement workshops and guidance one-to-ones. Any support needs to balance the financial and practical aspects of retirement.”
Offering a midlife financial health check on retirement readiness can boost engagement and help staff adjust in advance. Meanwhile, tailored financial coaching and advice, as well as digital tools such as interactive calculators or retirement planning apps, can help staff track their goals. Will-writing services and workshops on protection, power of attorney and estate planning provide practical support.
“Employers can work with consultancies or pension providers that offer advice around retirement planning and pensions engagement,” says Blood. “Digital guidance is something that we expect to see evolve with time, but most offer employee access to financial advice for a fee, which can vary with providers. Employers should work with pension schemes to ensure employees have access to post-retirement options and advisory services.”
Health and care assistance
It is important employers offer benefits that help employees with sudden illnesses, health problems and unexpected care costs when planning for their retirement, to ensure they are prepared for any eventuality. Staff can be signposted to the appropriate products and benefits to support their needs with this, such as private medical insurance, critical illness insurance, income protection and life insurance. Many of these are also provided at group rates. Additionally, employers should offer wellbeing services and support for employees who are carers.
“Access to employee assistance programmes and relevant information can help with providing additional support either on an immediate, temporary or long-term basis,” says Blood. “This can also help staff manage the financial and practical challenges of caregiving, such as home adaptations, setting up power of attorney, or checking entitlement to state benefits.”
Presenting information
It is vital that employers ensure employees are aware of relevant pension and retirement planning benefits as early as possible, while ensuring their approach takes all needs and preferences into account. Organisations can have a meaningful impact by explaining the outcomes they can support with and then laying out options for employees. It is also important to target education to the demographic of the workforce with whom it will best resonate.
“[Employers] should promote early and consistent pension contributions and default employees into the highest contribution tier under a matching scheme,” says Smith. “This approach boosts savings without adding pressure. Combine it with clear, relatable education that brings pensions to life and fosters long-term saving habits.”
Total reward statements can give employees a clear picture of their current benefits, helping them understand what they may need to personally cover in retirement. Organisations can also signpost support available through pension providers, such as financial wellbeing resources or presentations designed to boost retirement planning engagement.
Employers could also consider offering seminars which take a broader view of financial planning, including health, care costs, and emotional wellbeing. Employers can help to fund this support, with up to £500 tax-free for individual employees, says Blood.
One challenge when approaching retirement can be balancing the life employees live now with what they hope to have. The more an employer can support with this in advance, the easier achieving it can be.
