The looming pensions crisis cannot be ignored any longer. Auto-enrolment has been successful in getting six in every ten eligible workers saving through a workplace scheme, but their ability to contribute adequately is being severely hampered by poor wage growth.
The report, Employee Attitudes to Pay and Pensions, revealed that four in ten think they should be contributing more than ten per cent of their salary to their retirement savings, while 22 per cent admitted they didnt know how much they should be contributing. The shortfall between what employees are paying in and what they think they should be paying is highlighted by the fact that over half of UK workers have considered how they might work past state pension age. Some 13 per cent are even worried that they will never be able to afford to leave paid employment.
When asked how they plan to retire from paid employment, 40 per cent of employees said they want to reduce their hours gradually from full-time to part-time, with 32 per cent planning to work full-time right up to retirement.
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Charles Cotton, reward adviser for the CIPD, said: Until the government and businesses can tackle the root causes of the UKs productivity challenges, we won’t see the wage growth needed to improve individual pension contributions and people may need to stay in work a lot longer to have a sufficient income.
Businesses, and HR professionals in particular, need to be prepared for the real possibility that over half of their workforce will want to be employed beyond the state pension age. To support them, and reap the benefits of an age-diverse workforce, they need to think carefully about how they will manage and support these individuals, from training and development through to reward schemes, reasonable adjustments in the workplace and wellbeing support.
“We need a collaboration between employers, employees and the government to ensure that workers are getting the financial information and education they need around retirement planning, and, if they do plan to work to a later age, that they get the support they need in the workplace.
The survey also found that the size of a business has a considerable impact on the individuals ability to save for a pension and the age at which employees expect to retire. Workers in medium- and large-sized businesses expect to retire at 65, rising to 66 in small businesses and 68 in micro businesses. Those who arent saving through a workplace pension scheme (typically those in smaller businesses) expect to stop work at 67.
Cotton said: While the extended timeframes for small businesses to adopt auto-enrolment into workplace pension schemes may have been good news for them, it seems many of their employees have been missing out on the security that a workplace scheme provides. In response, many individuals are planning to extend their working lives considerably beyond the average of 66 years and one in seven people in small businesses specifically dont think they will ever be able to afford to retire.
“In preparation for this, smaller employers need to review how quickly they can reasonably introduce a pension scheme as well as how they manage, develop and reward their staff. This can include such options as job design, flexible working, performance management and development. These efforts will help in attracting and retaining staff as well as helping them to exit the labour market when they want. Its this kind of action that businesses of all sizes need to be considering, and soon.