All our workplace pension schemes allow employees to choose where their pension is invested. As well as a default investment fund, they can choose to self-select a different investment fund depending on the level of risk and their personal preferences. This can include investing sustainably.
If your employees need help deciding what steps to take, they can visit Pension Wise – a government service from MoneyHelper that offers free and impartial guidance about pensions.
How much income your employees have at retirement, doesn’t just depend on how much money they save. It also matters how their money is invested and how well funds perform over time. This can vary depend on the investments chosen, the amount invested, and risk appetite.
The value of an investment can fall as well as rise and isn’t guaranteed. The value of your employee’s pension pot when they come to take benefits may be less than has been paid in.
Supporting employees as they approach retirement
When your employees are getting closer to the time they would like to stop working or start taking pension benefits, it’s important they know what their different options are.
As a first step, your employees need to know what they already have. Their pension pot can be made up of different pension arrangements, including employer pensions, the state pension, and personal pensions.
Setting a retirement income target
While most people expect to retire in their 60s, more and more workers are staying in the labour market past the State Pension age.1 This could mean it’s more important than ever to encourage your employees to plan for their future.
The closer your employees are to retirement, the more likely they are to know how much income they’ll need to cover regular outgoings when they stop working. Even if they have some time before retirement, it’s still useful to have an idea of what they’re aiming for.
Questions to get your employees thinking about their target retirement income could include:
- What retirement lifestyle do they want?
- What do they plan to do when they retire, who with whom, and where do they want to spend it?
- How much will they need to live on each year?
- What sources of income will they have for retirement?
- How many years do they expect to be retired?
As people tend to be living longer, they should bear this in mind, as their retirement income will need to support them for potentially 15, 20, or 30-plus years after they retire.
They can then review this income target each year – like an annual MOT on their future savings – and is particularly important as retirement approaches. This way, they make sure their savings are in line with their expectations.
Top tip: When your employees are thinking about how much they’ll need as retirement income, it’s a good idea to take inflation into consideration. As time goes on, the price of things tends to increase, so having an extra safety net in place can be useful.
Choosing how to take their pension benefits
When your employees are preparing for life after work, they’ll want to fully understand their options on how they could take their pension savings. To help with this, we offer easy-to-use online tools.
This includes our Your Retirement Planner, which provides a step-by-step guide to help your employees plan for the retirement they want. It’s a free resource that helps members see what their pension pot could be when they come to take it and how much income it could provide.
With our workplace pensions, we offer your employees the flexibility to take their money in a way that suits their lifestyle. This includes:
- Full or partial uncrystallised funds pension lump sums (UFPLS)
If employees are in any doubt about their retirement options, they can visit Pension Wise for free, impartial guidance, or they can speak to a financial adviser who can provide personalised advice for their circumstances. There may be a charge for financial advice.
When they have all the information they need, they’ll be in a much better position to make the best decisions for them.
1Planning and Preparing for Later Life: Research and analysis, findings from the 2020/21 survey. Data source, www.gov.uk, DWP research report no. 1008, first published June 2022, updated November 2022.