Last week, in conjunction with the Centre for Economic and Business Research (Cebr), Wealth Wizards launched the ‘Working Late’ report – a detailed piece of research investigating the relationship between pension savings (or the lack thereof) and delayed retirement, as well as the consequences of an ageing workforce. The report was comprised of a survey of 1,000 employees and 500 employers, Cebr also analysed existing industry data surrounding the subject in order to provide a full picture, as well as working out the economic impact of delayed retirement.
The research took a two-dimensional approach. Looking at the reality of delayed retirement firstly from the individual perspective of employees, who feel ready to retire but may not have the option due to circumstance. Secondly from the perspective of employers who are faced with an ageing workforce and how they feel this impacts their business.
Amongst the findings for employees were a massive 86% stating that they want to retire at or before 65, but with only 37% believing this to be financially feasible. Additionally, 20% believe they will never be able to retire due to poor financial planning; that’s over 6 million people today who could be working beyond retirement age into their eighties.
The report identified pension under-savings as a key driver of this retirement gap, and one of the main causes that will lead to an ageing workforce potentially into their eighties. 56% of respondents wish they had added more to their pension when they were younger. Interestingly, 45% of the 18-34 age group are already concerned about their lack of pension savings despite retirement age being some decades away.
While employees want to leave work and enjoy their retirement, conversely almost half of employers (45%) said that they would embrace their employees working into their eighties. A clear cost to productivity is associated with a workforce that is unmotivated because they feel ready to retire and can’t. However, employers are seeing significant benefits from employing motivated older people with attributes like life experience and industry and company knowledge. Additionally, there is a great deal of value from an employers’ perspective in an individual who could afford to retire but chooses to continue to work out of dedication to their job.
The report indicates that almost half of employees over 55 believe that their employers should be doing more to guarantee their financial stability in retirement. This rises to 59% amongst those aged between 18 and 34 demonstrating that there is a strong appetite amongst this group for employer assistance in planning for their older age.
Providing financial advice is important, but employees must also have access to a large enough pension pot, for that advice to be worthwhile. Our data suggests more than one third of employers are only matching their employees’ pension contributions up to the legal minimum (currently, just 1% of earnings). Only 17% match employee contributions to between 1-3%, while only 24% of employers match beyond 3%.
Although it clearly costs firms more to pay above the legislated minimum, there is growing evidence to suggest doing so can create an important brand-building differentiating factor in the eyes of top talent. Not only will the best people gravitate to these companies, it’s likely they will stay there longer too. This research proves that many employers are simply not running pension schemes that will leave their staff able to afford to retire when they want to.
On average employees want to retire at 60 but have to work nine years longer than they would like to, due to insufficient pension savings. While it’s great that some individuals choose to work for longer it is also important that steps are taken to ensure that this remains a choice, not a necessity. Few employers offer financial advice for their employees even though it is becoming increasingly accessible. Innovation in digital advice means we can provide it more cost effectively, which could ultimately prevent delayed retirement due to lack of savings for many more people.
Take a look at the insights taken from the Working Late Report in our latest whitepaper written by the award-winning journalist, Peter Crush, here.