The state pension on its own is unlikely to give retirees a comfortable retirement, says Jeanette Makings of Close Brothers


In April 2016, the state pension will change. This change is part of the government’s strategy to simplify pensions and to help encourage people to save for a secure retirement.

From April the maximum state pension will be £8,093.80 per year. However, this may not be attainable for some people, for example if their employer scheme was contracted out for a while and if employees have had periods away from work, say to raise a family. Even at the maximum state pension, is this likely to be enough to support most people’s desired lifestyle in retirement?

For most people, we believe the state pension will form an important part of the income they will need to rely on in retirement but it won’t fully cover their income needs, particularly if they have spent the majority of their life in the workplace with rewards and benefits.

According to the Office for National Statistics the average spend in retirement is £15,800 per year. Typically, while most people accept that they will have a lower income in retirement than when working, their retirement income aspirations will range from a half to two thirds of their final working income.

Employers looking at their own workforce can compare this to the ONS average and see the possible extent of the gap for their people. These income gaps will be primarily bridged by an individual’s pension.

Also, with the state pension age rising, some people who retire before state pension age will have a bigger gap to fill in that they will need to fund their lifestyle fully from their own pension and savings until the state pension kicks in. So whatever their desired retirement income, they will also need to factor in any gap years before they get that base pension from the state.


There are several practical ways an employer can help staff to understand these possible gaps and help them to narrow or even close them to give them the retirement they desire, such as:

  • Make sure you provide your staff with an easy to use, easy to understand pension saver modeller. The best ones will show what they can expect based on their current savings and retirement plans, and clearly illustrate any gaps compared to what they want in retirement. It should also show the effect of changing their savings, their investment fund and their retirement date.
  • Make sure they use the pension modeller. Communication, education and motivation are the tried and tested solutions to boost engagement. And it’s not only about saying it once, it needs to be a regular mantra.
  • Get them engaged with their pension. Whatever engagement programme you put in place, make sure it is multi-faceted and includes multilevel communication channels not just an online site. Face to face always delivers the best learning and engagement but this may not be practical for everyone. Why not get creative and have a ‘Making the most of your Pension’ day or week and involve the whole workforce?
  • Work with your pension provider to improve the content, layout and language in their communications and annual pension statement to ensure there are clearer, more relevant and include more impactful messages for staff. Also, include some calls to action to encourage staff to use the pension modeller and explore the difference changes can make.
  • Continue to prompt staff regularly – this is a continuous process not a one shot solution. Review your regular communications such as your payslips, notifications of increases in reward and include a prompt for staff to revisit their pension and use the modeller.

There are obvious benefits in this for individual employees but such actions can also benefit an organisation with an increase in engagement, retention of talent, improved wellbeing and productivity and so an overall positive impact on the bottom line.