For many of your employees, retirement will seem so far off that they likely haven’t thought about it. If they’re enrolled in a workplace pension and a portion of their earnings goes into the pot each month, they might assume that they’re on track for a comfortable retirement.

However, that isn’t necessarily the case, as many people are falling behind with their savings, even if they don’t realise it yet.

Fortunately, as an employer, there are ways you can support your staff and encourage them to engage with their pensions, so they can better prepare for retirement.

Read on to learn more.

The cost of a “comfortable” retirement is increasing

As the cost of living and life expectancies increase, the amount needed to fund a comfortable retirement is rising.

Each year, Pensions UK releases its Retirement Living Standards data, giving predictions about how much retirement will cost.

The latest release shows the annual cost for different living standards:

• A “minimum retirement” (£22,500 for a couple and £13,900 for a single person) – Covers basic needs with a small amount for leisure activities but no holidays overseas.
• A “moderate retirement” (£45,400 for a couple and £32,700 for a single person) – Covers essentials with a two-week holiday each year. This level of retirement living allows for a bit more spending on leisure activities, as well as a second-hand car.
• A “comfortable retirement” (£62,700 for a couple and £45,400 for a single person) – Covers essentials with more money for spending on luxuries. This income will also cover a more expensive overseas holiday as well as regular breaks in the UK.

It’s important to bear in mind that these are UK figures and the cost of living in the Channel Islands is higher. Also, these amounts are likely to continue rising as the cost of goods and services increases.

This means that employees who are still a while away from retirement will likely spend considerably more than this to maintain a reasonable quality of life when they finish working.

54% of Generation X will receive “inadequate” pension incomes in retirement

As you can see, retirement is becoming more expensive, and employees need to engage with their pensions to ensure they’re saving enough. Unfortunately, research shows that many people may struggle to generate enough income in retirement.

Data from the Social Market Foundation, in conjunction with Standard Life, shows that 39% of those in Generation X (people born between 1965 and 1980) will struggle to maintain their current standard of living when they stop working. What’s more, 33% are expected to have a shortfall of £10,000 or more a year.

Crucially, 50% of respondents to the Social Market Foundation survey expected a higher income than they are projected to receive in retirement.

This means that many people are unknowingly under-saving for retirement.

47% of people believe that their retirement finances are mainly outside of their control

Being proactive about their pensions is one of the best ways for your employees to achieve a better standard of living in retirement.

However, research from Standard Life shows that 47% of those surveyed thought their retirement finances are mainly influenced by factors outside their control.

As such, many of your employees might feel powerless to change their situation, despite under-saving for retirement.

Fortunately, this isn’t the case, and there are ways you can help them engage with their pension and take control of their retirement.

Educating your employees about their pension can make them feel more confident about retirement

If employees haven’t paid much attention to their pensions before, they may not recognise the various ways they could boost their retirement savings. This includes:

• Increasing their contributions
• Tracing lost pension pots
• Saving and investing outside their pensions.

In your role as their employer, you can educate them about their pensions and encourage regular conversations about retirement saving. We are also happy to support this with pension presentations as required.

The ZIO app is one of the most effective tools your employees have at their disposal here. They can access the platform and view a wide range of educational content teaching them the basics of pensions and how to better manage their savings.

For instance, retirement calculators will give them a sense of how much they’re likely to have saved based on their current contribution levels. They can then see how increasing contributions might affect the size of their retirement pot and quality of life.

Ultimately, by educating them about pensions and how to use the tools on the ZIO app, you can help your employees make informed choices about their retirement savings.

Taking control of their pensions in this way could mean your employees enjoy a better quality of life in retirement and feel more confident about their ability to save.

Get in touch

Together, we can support your employees with their retirement savings.

You can email pensions@rfsl.co.uk or call 01534 502000 in Jersey or 01481 747940 in Guernsey to discuss your current pension offering today.

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. 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 in subsequent Finance Acts.

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.