Resolutions for Future Pensioners
11 January 2019
The first few weeks of January are a time when many people take stock of their finances and plan for the new year ahead. Dipa Mistry Kandola talks through some of the resolutions the pensions industry and employers might consider to help people make progress towards their financial goals in 2019.
As with most New Year’s resolutions, it’s often better to have a few and stick to them than make many with little realistic chance of keeping them. Here are our top resolutions for the pensions industry which – if implemented – could help to provide better financial outcomes in retirement for Future Pensioners:
Take time to explain annual statements and, importantly, highlight when people need to do something.
We know annual statements can be complicated to read and understand, which is why we’re backing the industry’s latest push to deliver simplified annual statements that communicate to members in a clear, concise and consistent way. But it isn’t enough to simply provide the statement and leave people to interpret it themselves. Employers and pension providers should make it clear when a communication requires specific action as well as generally investing in educating their employees so that they are better empowered to take control of their finances and plan / save for the retirement they want.
Offer guidance when spring cleaning finances.
As the April tax year-end approaches, encouraging employees to think about whether there is scope to top up a pension and whether there might be the opportunity to take advantage of any tax breaks, via a simple savings app, is just as important as making sure they are making the most of their employee benefits (for example not buying benefits that their employer already offers).
Use annual pay review and bonus time to encourage savings.
When pay rises or bonuses are given, employers could consider prompting employees to think about topping up their pension savings perhaps drawing attention to potential tax advantages. Employees may not think of this option, organically, so a nudge to make sure it’s being taken into consideration could lead to better retirement outcomes. Employers could also go one step further and introduce a default increase in the rate of pension contributions at each pay review. Such mechanisms have been shown to lead to significantly greater levels of saving than if employees are left to their own devices.
Repeat this time next year.
Keeping an eye on your employees’ pensions should be an ongoing process, so doing an annual “health check” at the same point in the calendar can help Future Pensioners ensure that their savings are in tip-top condition year in, year out. It also provides a structure to the retirement savings
As resolutions abound, your employees / members will likely have renewed vigour when it comes to being savvy with their finances. Whether it’s worry stemming from the Christmas spending splurge, or desire to be distracted from the harsh winter weather outside, capitalise on peoples’ willingness to invest time in thinking about retirement, now. Members appreciate benefits, but also welcome the support and attention of employers that help them to think ahead. Given that 2019 may bring new mechanisms to make saving easier – including auto-enrolment uplifts and progress on the pensions dashboard – there’s no time like the present.