Employees don’t know how the flexibilities affect them and their savings
Although the pension freedoms have been in place for over six months, one in six employers fear that their staff are still confused about the new pension freedoms, according to research from Close Brothers Asset Management.
With retirees now able to access their pension savings with great flexibility – but with tax implications around certain options – almost a fifth (17%) of employers believe that their staff are still in the dark about their options. A third (33%) said that their employees have a limited understanding of the freedoms open to them.
Although the research revealed that 21% of employers feel their staff have a good understanding of pension freedoms, there is still a knowledge gap, where savers might not take advantage of their choices – or may make the wrong decisions.
Over a quarter (26%) of larger organisations have found themselves the go-to point for pension enquiries from staff, indicating that companies will need to be prepared to answer queries about options and flexibilities.
Jeanette Makings, head of financial education services at Close Brothers Asset Management, said: “There is clearly still a lot to be achieved when it comes to ensuring employees are well informed about the pension reforms and the impact on their financial decisions. There is an encouraging number of companies who feel their workforce has a good understanding of the choices they need to make, but there are still many who remain confused or who only have ‘limited knowledge’ and that is a concern.
“Lack of communication around the issue may stem from a concern that introducing a financial education programme will eat up resources, but this isn’t the case. Employers, with their knowledge of staff’s individual financial circumstances, can play a vital role in raising awareness and helping them make well informed decisions, so even small steps to help will make a huge difference. And it’s not just employees that will benefit: there are real returns for the business too in terms of enhanced engagement, improved financial wellbeing and increased productivity - all helping to make a difference to the bottom line.”