Raising awareness about the need to plan better for retirement

Helen Morrissey from Royal London says employers need to do more to make people aware of the need to save more for their retirement.

Savings & Pensions


We have long grappled with the question of how to get people to save more for their retirement. At a time when people prioritise more immediate financial goals such as debt repayment or saving for a house deposit it can be hard to save for something that is many years away.

However, not preparing properly for retirement means you could see a significant fall in your standard of living or you may have to work much longer than you want to.

The government has tried to address this by bringing in auto-enrolment where employees are automatically enrolled into a workplace pension scheme by their employer. Through this, more than 10 million people are now saving into a pension when they otherwise may not have done.

As well as getting employers to provide a pension for their employees, the government also sets minimum levels for the amount that should be contributed – this currently stands at 8% of an employee’s salary. This is made up of a contribution from the employee but also from the employer and an extra boost in the form of tax relief from the government.

The need to plan ahead

While auto-enrolment gets people’s retirement savings off to a good start, it’s important to understand that this is only a start. In reality people will need to do more if they are going to retire comfortably.

For instance, while auto-enrolment did a great job by automatically putting people into a pension there were always concerns that people then wouldn’t bother to save more than the minimum amount in the mistaken belief that this would be enough. In reality people need to save more like 15% of salary if they are going to have a decent retirement income.

Research from Atlas Master Trust highlighted the challenge. According to the data more than three-quarters of employees said they didn’t understand enough about their pension to make informed decisions about it. In addition, 60% of those surveyed said they believed saving at the auto-enrolment minimum would be enough to give them enough income in retirement.

So while the government has put a decent foundation in place we need to make sure that people know they still need to engage with their pensions if they are to get a good income in retirement.

Raising awareness to plan better for retirement

The government is trying to raise awareness of the need to engage more. Its current campaign looks to raise awareness of guidance services such as the Money and Pensions Service. You can also speak to an independent financial adviser who will go through all your options with you and put a plan in place.

However, if you already have a workplace pension you can also talk to your pension provider or your employer to learn more about pensions and what more you can do.  For instance, while many people only contribute at auto-enrolment minimums it is worth asking whether by boosting your own contribution you can get a bigger contribution from your employer as well.

The Atlas Master Trust research demonstrated the importance of the workplace ,with 96% of those questioned saying they want their employer to be more open with them about whether they are saving enough for retirement. Luckily, the same research showed that employers increasingly understand they have a role to play in preparing employees for retirement.

So while policies like auto-enrolment have had a really positive impact it is vital that people know they need to do more than the minimum to get the retirement they aspire to. There are resources available and talking to an adviser, a guidance service or your employer will help you gain a better understanding of what you need to do.

*Helen Morrissey is a pension specialist at Royal London.

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