Article Supporting part-time employees with pension savings

The trend of colleagues saying goodbye to full-time hours is growing. Now, according to research from the Office of National Statistics (ONS), around a quarter of the British workforce work part-time.¹

Flexible ways of working and part-time roles are starting to play a part in today’s job market – and there no longer seems to be a ‘one size fits all’ approach to working.

And when it comes to retirement, our Second 50 research – featuring the views of 900 UK workers and 100 retirees – found that only 28% of people expect a ‘clean break’ into retirement. We discovered that 40% would prefer a longer, more gradual transition out of work through flexible work arrangements, such as part-time hours.²

But while going part-time might seem attractive to some, these employees might face unique challenges concerning their pension savings – which could significantly impact their future financial security.

This article will provide practical tips to help you support and empower part-time employees to focus on their pensions, encouraging them to realise the impact it could have on their retirement.

The rise of part-time work

Simply, the classic ‘9-5’ doesn’t work for everyone. The pandemic normalised the idea of hybrid or remote working, and many workplaces now offer flexible working patterns.

There are many motivations for going part-time. For example, flexible or part-time hours may help reduce the cost or pressure of caring responsibilities – or help with work-life balance.

The number of people with second jobs, or ‘side hustles’ has also boomed – with nearly half of Brits having one on top of their main job.³ It could be that many employees decide to go part-time to pursue another passion or make money from a hobby.

Reduced working hours could also help with work-life balance and allow workers to prioritise their health – both physical and mental. Or, it could help them fulfil travel and life goals, like studying or learning a new skill.

The financial impact of going part-time

While it’s important to encourage colleagues to prioritise their welfare, part-time work generally results in lower earnings, leading to lower pension contributions. Though it’s dependent on what pension benefits you offer, it could potentially have a long-term impact on their retirement standards.

In turn, part-time employees might need to consider working longer hours later in life or extending their working years to meet unique retirement goals. Our Second 50 research found that 22% of people surveyed don’t plan on ever retiring, and over half suggested they plan on transforming the way they work as they age, regardless of whether they retire or not.²

Understanding retirement needs

It’s important to raise awareness among employees about how part-time work can affect their post-work savings. Saying that, our financial wellbeing research has found that only 25% of us have a specific picture in mind of our future selves.⁴ Having a good idea of what we’d like the future to look like can improve the financial decisions we make now, and in the future.

As employers, you could encourage staff to understand how much they’ll need for their ideal retirement. The Retirement Living Standards from the Pensions and Lifetime Savings Association detail three levels of retirement: minimum, moderate and comfortable. It explains the required expenditure needed for each standard of living and could help set realistic retirement savings goals.

Once these goals are set, you could provide tips on day-to-day financial management – encouraging budgeting methods and tools that may limit unnecessary expenditure. Our article on how to help engage your colleagues with their savings goals could be a helpful read.

You can also support your colleagues with their pension, right up to retirement with our handy toolkits.

Brushing up on pension knowledge

Many part-time employees could be unaware of the options available to them through their workplace pension scheme. Here are our recommendations of what to showcase (if applicable) to help staff potentially boost their retirement savings:

Salary sacrifice: while not suitable for everyone, salary sacrifice schemes can allow employees to exchange some of their take-home pay for pension contributions (a non-cash benefit). While overall earnings might be lower, it can boost pension savings through tax efficiency.

Review personal contributions: employees could consider reviewing their personal pension contributions to see if it’s working for them, at a time that is appropriate. Any money paid in also qualifies for tax relief and could efficiently help them build a bigger pot for retirement. It’s worth mentioning to them that the value of an investment can fall as well as rise, and isn’t guaranteed.

Combine pension pots: walk them through how to consolidate current pension pots, however small, to potentially reduce charges and increase the value of their overall savings. Be sure to remind them of these key points to consider:

• That they may lose features, protections, guarantees or other benefits – in turn, they should compare products before consolidating.
• That it’s up to them to decide if it’s the right decision. If they’re not sure, they can speak to a financial adviser (which there may be a charge for). They can find a financial adviser through MoneyHelper if you don’t have a scheme adviser.
• That it’s important for them to remember that the value of their consolidated pension pot can still fall as well as rise, and the final value of their pension pot when they come to take benefits may be less than has been paid in.
• That any new funds they move their money into will have their own set of risks that will be detailed in the fund information.

Auto-enrolment: Highlight that part-time workers often don't meet the earnings threshold for automatic enrolment in workplace pensions. These non-eligible jobholders could choose to opt in to their workplace pension, helping to increase the overall pension savings of part-time workers.

The importance of financial wellbeing

Regardless of whether your employees work part-time, or not, it’s key to help colleagues develop a healthy perspective on money and mindset when it comes to financial planning.

Money talk is still taboo for plenty, and it could be that many of your employees are afraid to talk about their pension, or ask for help.

Our financial wellbeing hub for employers has plenty of tools, resources and guides for how you can help your colleagues with their financial wellbeing.

Education is best

Employers are crucial in educating part-time employees about the implications of reduced hours on their retirement savings, and offering strategies to enhance their pension pots.

By promoting financial awareness, discussing options like salary sacrifice, combining pensions and auto-enrolment, you could help part-time workers build secure, fulfilling retirements.