A workplace pension is an excellent benefit for your employees. However, setting up a scheme and enrolling them might not be enough to help your team prepare for retirement.

Research shows that many employees lack the understanding to engage with their pensions and build their retirement savings effectively.

For instance, IFA Magazine reports that 44% of employees surveyed said they wanted more guidance about their workplace pension and retirement planning.

You can help your employees get to grips with their pensions by teaching them these five important details.

1. What kind of pension they have

If your employees haven’t engaged with their pension at all, they might not know the basics, like what kind of scheme they are enrolled in. This could mean they make false assumptions about their retirement savings.

For instance, if they assume they have a defined benefit or “final salary” pension, they may think they will receive guaranteed payments for the rest of their life. However, if they have a defined contribution pension, this won’t be the case.

A misconception like this could mean your employees don’t realise the importance of building a healthy retirement pot and planning how they’ll draw an income. That’s why it is important to make clear to your employees what kind of scheme they’re enrolled in.

2. How much is paid in each month

When a new employee starts, their contract will have information about their pension contributions and whether the company also pays in. However, not everybody will pay close attention to this, and if they’ve been with the company for a while, they might have forgotten about contribution levels.

Giving them clear information about how much is going into their pension each month means they can make informed decisions about their retirement planning.

3. What their investment options are

Many people don’t realise they have control over how their retirement savings are invested. Instead, they contribute each month and simply accept the level of growth they achieve.

However, your employees could change their pension investment funds for several reasons. For example, they might adopt a higher level of risk – especially when they’re younger – to potentially increase growth. Meanwhile, older employees might want to de-risk their pensions to shield themselves from market volatility as they approach retirement.

Additionally, employees might want to change their investment options to make sure they are aligned to their investment horizon

You may need to explain to your employees that they can use the ZIO app to review their pension investments and research the available investment options

4. How they will eventually generate an income in retirement

Throughout their working life, your employees may focus on building their pension savings. What they might not have considered is how they’ll generate an income from those savings when they retire.

Explaining what type of pension they have is a useful starting point. However, we can help educate them about:

• How pension income works and the specific rules around this
• What annuities are and the benefits of a guaranteed income
• How much State Pension they might receive
• The tax implications of drawing from their pension.

Armed with this knowledge, they can begin planning their retirement income with confidence. We can offer education sessions for your employees to help them understand more about their pensions.

5. How much they might need to save to achieve their dream retirement

It’s difficult for your employees to plan for retirement if they don’t have a clear savings goal to work towards.

Everybody’s savings goal will be different because it depends on the kind of lifestyle they want to lead in retirement.

Figures from Pensions UK estimate that a comfortable retirement in London would cost £64,800 a year for a couple or £62,700 for a single person. Your employees would likely need more than this, as the cost of living in the Channel Islands is typically higher.

Also, inflation means that these estimates will typically increase over time.

Communicating these figures to your employees can help them recognise that they need a significant amount saved in their pension to afford retirement. However, it’s equally important that they consider their own goals and create a savings target that works for them.

We can help you educate your employees about their pensions

If your employees have gaps in their pension knowledge, we can offer educational sessions. With our support, they can gain more confidence about their retirement savings.

You can email admin@rfsl.co.uk to learn more about our services today. Alternatively, call 01534 502000 in Jersey or 01481 747940 in Guernsey to discuss how we could support your business.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 50. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

Rossborough Financial Services Limited is regulated by the Jersey Financial Services Commission under the Financial Services (Jersey) Law 1998 and licensed by the Guernsey Financial Services Commission.