Employees now need to think through their retirement plans step by step


For those retirees with defined contribution (DC) pension pots, the pension changes around retirement choices have rendered the path to a stable retirement income full of difficulties and unforeseen questions.

Among other things, they now have to decide if they will continue on the default path to annuity purchase, or whether they might instead draw down their pension, take a cash withdrawal, or look at a combination of options.

They will also need to consider when they want to retire, how much income they want each year in retirement and if any other savings they have would be better assets to utilise before their pension pots.

WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice, has pulled together a list of tips for employers with retirees to consider.

Encourage employees to make a basic retirement plan – They should plan flexibly, thinking about what they will be doing, how much they think that might cost and when those costs might be incurred.

Your employees should collate information on all of their assets – They should know the value of all pension pots, savings and investments that will form their retirement income, and know when they will pay out.

Encourage employees to get a State Pension statement – As of 6 April 2016, the full new State Pension will be £155.65 per week and will depend on having 35 qualifying years of National Insurance contributions and there will be a deduction for those who were contracted out of the Additional State Pension.: employees should check their State Pension record and National Insurance contribution history early to fill any unnecessary gaps.

Your employees should find out what their options are - Pension Wise, providing free and impartial guidance on DC pensions for those age 50 and above. Although it can’t provide advice, it can give a good insight into their options, and the advantages and disadvantages of these.

Employees should find out what their pension scheme allows – Does it offer the full range of pension freedoms including, annuity, drawdown, and cash withdrawal? If not, they may need to transfer out of the scheme to a provider who can facilitate this – and will need to know how.

Your employees will need to find out how long it will take to get access to their pension – Pensions don’t operate like bank accounts, so they will need to know exactly how long it will take for money to come through so that they can plan for this.

Employees should work out which options might be right for them and how to put their plan in place – The guidance from Pension Wise might be enough, but if they have more than just a small pension, perhaps some ISAs, other pensions, property, or if their partner has other assets, they might want to consider getting financial advice.

Employees should be clear about all the costs involved – Doing it yourself isn’t free and there will be charges and commissions to pay.

Scams don’t look like scams - Scams look and sound legitimate, often through very professional-looking websites and literature. Employees should check before they do anything that the company is registered with the Financial Conduct Authority (FCA). 

Lastly, employees should take their time - Retirement is likely to last a long time, so they shouldn’t make snap decisions or rush into anything they’re not sure about.

Jonathan Watts-Lay, Director at WEALTH at work comments: “The freedoms people now have with their pensions is a good thing, but it can be incredibly daunting. Employees need to understand the many retirement income options they now have because of the pension freedoms, and to know that support is available to help them make the most of it.


“There is a risk that without appropriate financial education employees might not understand the implications of a decision made at-retirement or indeed they may end up depleting their pot before retiring, and thus be unable to afford to retire at their preferred date. Financial education and regulated advice is a really important facility to be available to employees, to help them make the right choices.”

WEALTH at work is blogging about the key areas of employer consideration when helping their employees through retirement in Reward's financial education hub.

The hub examines all the changes in pensions and looking at how you can help your employees with financial education across all their savings. CLICK HERE to access the hub

For further information about WEALTH at work, please CLICK HERE