Not everyone is ready for retirement – how employers can help

Data from our latest savings and resilience tool shows just over a third of households are on track for a ‘moderate’ income in retirement.

We’ve found that to reach a moderate lifestyle in retirement, a single person would need an annual income of £26,129 and a couple would need £38,128. This standard will allow people enough to live on, with a little extra for some nice-to-haves. While this is a starting point, it’s important to remember that retirement will look different to everyone. So some may need more, or less, than our estimate.

But why are two thirds of households not on track?

The ‘pension gap’ is the gap between the pension savings a household needs for a moderate income in retirement, and their current level of pension savings.

With rising inflation increasing the amount of money needed for a moderate retirement, the pension gap has opened up to £31,546 – four times more than it was in 2019. And the cost-of-living crisis has had a bruising impact on our finances, which many households are still grappling with.

But if we take a closer look, we can see that where we live can have a big impact. According to our tool, Wokingham, for instance, is well on track – on average, households have a pension gap of just £265. It’s the local authority with the lowest proportion of single households, which could certainly be a contributing factor. But in Kingston-Upon-Hull, the gap to a moderate retirement income stands at a massive £54,641.

See how resilient your area is with our comparison tool

We should always be thinking about how we can improve employees’ financial resilience, but the disparity across the UK shows more needs to be done.

How can we close the pension gap?

Cash could be waiting to be found

The government’s ongoing ‘Pensions Review’ is looking at how to deliver better outcomes for members.

Moves to reduce lost pensions will do a lot to make sure much needed pension savings don’t go astray.

But we should always be making efforts to encourage employees to find any old or lost pensions – it can potentially add thousands of pounds to their retirement savings. The steps to share with employees are simple:

• Make a list of all your employers and check to see if you have pension paperwork for them.
• If you can’t find any pension paperwork but think you might have a pension with them, contact the government’s pension tracing service.

All you need is either your employer’s name or your pension provider’s name. The service can’t tell you if you have a pension with them, but they can give you contact details so you can find out.

Let employees save more for their future

Offering to match an uplift in pension contributions can be a huge help. For example, if an employee chooses to contribute above the minimum percentage, the employer matches that percentage (within reason).

This would offer a real incentive for those with the money to spare, as they’ll get something in return for investing their spare cash in their future. By helping employees to become more prepared for retirement, their financial resilience strengthens. And with poor financial resilience affecting health, productivity and motivation, it’s in employers’ interest to help.

It also offers a more attractive pension package to prospective employees – people are increasingly looking beyond salary when it comes to job opportunities. Benefits packages are hugely important and may be factored into someone’s decision on whether to accept a job or not.

Keep the pension conversation current

Employers should be making efforts to help employees think about their pension. It’s important to highlight that there’s no better time than the present to think about saving for the future.

Offering financial education on pensions is a great way to keep the conversation current. Some benefit providers already offer financial education, so employers should be checking what’s available to them.

More on our Financial Wellbeing programme

There are also lots of ready-made resources if offering bespoke education isn’t an option. Campaigns like Pension Wise, National Pension Tracing Day or Talk Money Week have done a lot of the work already by offering regulated content. Team meetings could be a great place to focus on pensions and share resources – it’s an opportunity to share information to everyone and shows it’s a subject supported by line managers and senior leaders. But remember, due diligence should always be done on sources before signposting.

Talking to employees about pensions doesn’t conjure up more money for them to save, but the hope is that it brings an awareness to employees about prioritising retirement saving into their budgets.

We offer a workplace savings platform that caters for employees at every life stage. This includes easy access to a Group SIPP and payroll-enabled ISA and Fund and Share Accounts, all fully supported by our tailored financial wellbeing programmes. We also offer Active Savings (cash deposits), a Lifetime ISA and Junior ISAs, all accessed via our user-friendly app.

This article is not personal advice. If you are unsure of a course of action, please ask about advice.