Retirement Reality: 60% Of Employees Don’t Know How Much To Save

63% Plan To Rely Solely On Their Workplace Pension In Retirement

To dig a little deeper, we asked employees how they plan to fund their retirement.

• 63% plan to rely solely on their workplace pension pot(s)
• 15% will use their state pension alone
• Most concerning, 10% haven’t even thought about their retirement.

This data reveals a critical issue: many employees are relying on these options without truly knowing how much they’ll need for a comfortable retirement. This lack of planning could leave a significant financial gap, preventing them from living the retirement they’ve always dreamed about.

It’s crucial to address this gap and empower employees with the knowledge and tools they need to secure a bright financial future.

How Much Do Employees Need For Retirement?

There isn’t a set figure, as everyone has different lifestyle expectations. However, Retirement Living Standards (RLS) has provided some useful benchmarks:

• Basic Needs
  The minimum a single person would need for retirement is £14,500 a year. This aims to cover basic needs, with a little amount left over for fun and social activities.
• Moderate Needs
  For someone wanting to live a “moderate lifestyle” with more financial security and flexibility, a pot of £31,300 a year is sufficient.
• Comfortable Lifestyle
  To live comfortably and be spontaneous, a single person would need around £43,100 a year. For a couple, the number increases by around £10,000 per year.

Avoiding Financial Shortfalls: The Importance Of Retirement Planning…

The fact that a majority of employees don’t know how much they need to save for retirement—and whether they are contributing enough—can lead to significant issues down the line.

Without effective planning, employees could face a significant shortfall when they reach retirement. This is especially true for those relying solely on the state pension, which currently provides £221.20 per week or about £11,519 annually (this will vary depending on an employee’s National Insurance record).

It’s crucial for employees to understand their retirement needs and start planning early. As an employer, you can play a pivotal role in this process.

By providing workplace education, valuable resources, and attractive incentives, you can help ensure that all your employees enjoy a secure and fulfilling retirement. Your support can make all the difference in their financial future.

Richard Noble
Senior Consultant, Employee Benefits

74% Of Employees Want More Education On Pensions

Although employees don’t have a clear understanding of how much to save, they do want to bridge the knowledge gap with more pension education. This is increasingly important when you realise that some workers don’t understand their pension scheme at all.

• Over half of respondents (57%) “somewhat” understand their pension
• 24% fully understand their pension (it’s not all bad news!)
• But unfortunately, 13% of employees don’t understand their pension at all
• And 5% are just unsure.

In order to help your team figure out their estimated living costs in retirement, it’s important they understand their pension first. By helping to fill in the knowledge gaps, you can then focus on providing further retirement planning support.

Financial Planning & How To Save: Tops Employees Pension Education Wish List

To help you provide pension education that employees actually value, we asked staff what they’d like to learn about. The top response was financial planning and how to save for retirement.

• 67% said financial planning and how to save
• 47% want to know more about salary sacrifice pensions
• And 43% wanted to learn about the tax benefits of their pension.

How To Help Your Employees Plan For Their Retirement

Despite the fact employees might not know how much to save, enhanced pension contributions are one of the most sought after benefits. 56% of employees said this was “very important” to them.

You can use this insight to rethink the benefits you offer to your team. If you contribute more, employees are more likely to contribute more themselves.

Here are some ways you can help as an employer:

1. Introduce Financial Education To Your Benefits Proposition

Offering financial education in your company’s employee benefits package improves your team’s financial wellbeing. It’s a great way to get them thinking about retirement. Whether they’re 25 or 45, learning about pensions is important. Better yet, understanding the importance of retirement saving and how to save is key.

Through financial education, you can keep staff informed about their workplace pension, provide extra support, and boost their financial confidence. It may also give your employees peace of mind and reassurance that they’re heading in the right direction, and have a better understanding of where they stand with saving.

2. Provide Access To Financial Advisers

For the more technical and/or complicated side of things, a financial adviser can provide expert advice and guidance.

When asked what kind of pension-related support they would like, 67% of employees want their employer to provide access to financial advisers.

Financial advisers can help your employees to:

• Understand the importance of saving for retirement
• Make informed decisions about their savings
• Develop a financial roadmap
• Find their old pension pots from other providers / employers.

With such a large proportion of employees not knowing how – or how much – to save, a financial adviser is a valuable route to take.

3. Rethink Your Communications Strategy

How do you communicate the workplace pension scheme to your employees? After setting up the scheme, it’s essential to continue providing effective communications. This is key to ensuring employees understand the value of retirement planning and remain actively enrolled.

We asked employees what types of communication they’d like from their employer in terms of their pension scheme:

• 37% of employees requested webinars
• 33% wanted 1-2-1 sessions
• 31% suggested employee benefit platforms.

These are effective methods of sharing information and helping your staff to understand why and how to save for retirement.

Make Communication Easy With Benefits Technology

Benefits Platforms (such as My.Drewberry) can provide your employees with all the information they need to know about their workplace pension, in one central location. Not only this, your employees can:

• Adjust and change their pension contribution amounts
• Use handy calculators to help them calculate if they’re on track with their saving goals
• Look at their investment fund options
• See how their pension scheme is set up, e.g. salary exchange or net pay.

4. Empowering Your Employees To Save

To empower your employees, remember to reiterate the importance of retirement saving and the benefits of starting to save as soon as you can.

Make sure to explain how saving now can lead to a more secure and comfortable retirement. You can also make a point of highlighting your pension contribution as their employer. This shows your commitment to their long-term financial health.

It’s also important to extend discussions beyond older employees nearing retirement. Encouraging younger employees to start contributing to their pensions early can significantly increase their savings over time.

Nick Nelms
Senior Consultant, Employee Benefits

Get Expert Workplace Pension Advice

To ensure your employees are prepared for retirement, it’s vital to address the gaps in their pension knowledge. By providing financial education, access to advisers, and effective communication, you can support your team in achieving their retirement goals.

If you need further support with your company pension, contact our team at 02074425880 or email help@drewberry.co.uk. Our financial consultants are industry experts and can provide the support you need.

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