An increasing number of workers in Britain are delaying their retirement, which has got employers worried - that’s according to new research by professional services firm, Towers Watson.
Of 100 employers surveyed as part of the company’s Fit for Retirement report, nearly half (49%) were concerned about workers retiring beyond the national retirement age, citing the inability of workers to afford to retire as the most likely cause.
Inadequate retirement savings of staff was a concern raised by nearly two thirds (62%) of employers and three-quarters (74%) of those surveyed anticipated this to become a more significant issue in the future.
The main concern shared by employers is that this financial inability to retire can cause older workers to suffer with stress and a lack of engagement in the workplace. Employers also expressed concern that an aging workforce could prevent younger employees from developing, causing talented youngsters leaving companies in search of career progression opportunities.
Phil Percival, head of the FiT Age Programme at Towers Watson, said in a media release:
“More people in the UK are faced with having to delay their retirement, with potential consequences for companies that don’t encourage their employees to take control of their financial futures. Employer concerns are not without foundation; employees that need to retire later report higher stress levels and can be less engaged. Gaps in financial well-being and retirement readiness create the risk for an employer of a distracted workforce with higher costs. Affected employees may also contribute to blocked career paths, increasing the risk of losing critical talent.”
According to official government statistics, people in the UK are working longer than they used to. In 2014, there were over 1 million people aged 65 and over in work compared to 874,000 at the end of 2011.
The underlying reason for this trend is believed to be a lack of financial awareness when it comes to retirement, with only one in ten employers believing their workers knew how much to save for their retirement.
Furthermore, just four in ten believing their employees knew what to expect from their company pension scheme. As a result, nearly a third of employers expect to place more emphasis on their workers’ ability to retire in the coming years.
Mr Percival said: “If companies want to have a good idea of when older workers will be able to retire, they need to better understand the financial circumstances of their workforce. The reasons for the shortfall in savings typically include an unwillingness to think about retirement because it’s seen as too far in the future, negative perceptions about affordability, and the complexity of our pensions system. These factors can all led to procrastination as people put off making important decisions about their future. In order to help employees reach their retirement goals, employers must take responsibility for informing and educating workers early on about how to achieve the retirement income they want.”
Major pension reforms came into effect this April, which are neatly outlined in the below video:
However, these reforms have been met scepticism by employers, with less than a third (30%) believing that that defined contribution (DC) pension plans will now be better able to deliver an adequate standard of living in retirement.
Less than half (42%) think that the new DC pensions freedoms will be more effective at managing employees into retirement and only three in ten (28%) of employers think that younger workers will contribute more to their DC plans as a result of the greater freedoms available.
“Employers are understandably concerned that despite the new pension freedoms giving employees more choice over their retirement, the same problems remain when it comes to encouraging people to save enough for their retirement,” My Percival said.
“Education, education, education is the key to overcoming these barriers and helping employees clearly see the financial goals they need to achieve to meet their expectations for retirement,” he added.
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