Part two: keeping decision making rational, supporting those nearing retirement

Last week, I shared the first two of five communications tips - outlining options for employers to consider to help support employees with their financial wellbeing during the pandemic. This week, I'm sharing the final three - 

3. In the face of cash-flow problems, keep pension decision-making rational.

Many employees’ income or household incomes have been impacted as a result of Covid-19’s implications, and more so than ever, employees are focused on the short-term nature of their finances.

As a result, some employees could be tempted to free up cash by reducing their pension contributions, or if they’re over 55, start withdrawing from their pension pot earlier than planned. These are both ideas that could easily be put forward to them by a friend or a family member, or from a simple Google search. But they’re also key pension decisions that must be made rationally with both their short-term circumstances and long-term future considered.

Employers should consider getting targeted and here are two-ways to do so:

1. When employees request to change their pension contributions, ensure that there is a process to make them aware of:

    • The true cost of lowering contributions; for example, the potential loss of tax-relief, employer contributions and compounding

    • Alternative options for resolving cash-flow problems

    • How employees can get support with both their pension and overall financial decision-making

2. Make sure that those who are over 55 understand the downsides and risks of accessing their pension pot early. For example, do they understand:

    • How they might limit the amount of contributions they can make in the future without incurring a tax charge (Money Purchase Annual Allowance, (MPAA))

    • That if they’re in debt and start withdrawing their pension savings, debt collectors can then go after these withdrawals from their pension pot?

    • That the government has temporarily lifted the penalty for savers who need to dip into their Lifetime ISA funds because of coronavirus?

In both cases, it’s important that employees know who they can talk to if they need some guidance or advice. A short conversation with a professional or Pension Wise, could ensure they make the right decision. Or, if they’re feeling incredibly stressed by their finances, a conversation with their Employee Assistance Programme (EAP), if one is available, could help too.

4. Provide targeted support for those with retirement on the horizon.

Employees who are planning to retire in the next few years will no doubt be experiencing even more worry than other pension savers. It’s very likely that their pension investments and overall financial resilience/capabilities has ‘taken a hit’ in some form. And as a result, they could be worrying about what this means for their future.

This worry could be weighing heavy on their minds, impacting their productivity at work, and more importantly, their overall wellbeing. It’s important they’re given extra support during this period of discomfort and uncertainty.

Employers are in the unique position to offer this by providing education that helps employees understand:

  • How Covid-19 has impacted their pension savings and future retirement income

  • How to resolve a pension shortfall and what flexible working options exist

  • Their options for withdrawing benefits and keeping their pension pot invested

  • The costly mistakes other retirees make like not shopping around for an annuity, forgetting about inflation when working out their income needs etc

  • The importance of getting some guidance or advice, a short conversation with a professional adviser or an organisation like Pension Wise can reduce their risk of making a costly mistake

  • And much more!

Often pension providers have lots of tools, modellers and content that can help with the above, but when money worries are overwhelming it’s difficult to know where to start, so employers can make that start for employees by collating the relevant information into a meaningful communication. And ideally open up a two-way conversation, so that employees are not alone with their worries but have someone to talk to.

If you’re a client of ours, remember that your employees can freely access our Retirement Services - they can phone our helpline, arrange a consultation and request a personalised options pack.

5. Take a compassionate and supportive approach, and keep the dialogue going.    

Money worries and problems can hit people hard – making them feel overwhelmed and powerless. Without support and a plan of action, it can be truly exhausting. But whether it’s a pension worry or general financial problem, there is support out there – Pension Wise, Citizens Advice, Step Change, National Debt Line, EAP … the list goes on.

As an employer, you can help by taking a compassionate and supportive approach to their financial wellbeing. Letting employees know that it’s okay to feel worried or overwhelmed by finances and pensions – especially in these uncertain circumstances – but making it clear that it doesn’t have to be this way. Make sure employees are aware of their support network (both in and out of work).

Despite this dialogue about pensions and overall financial capability being driven by the implications of Covid-19, it’s important that this dialogue between employers and employees keeps going. We have an opportunity to break the money taboo and keep financial wellbeing a key area of employer duty and focus.    

If you’re a client of ours, remember that your Consultant and our In-house Communications Team are on standby to support, with a range of ready-to-go articles, brochures, modellers, webinars, videos and more, plus the ability to bespoke any communications to exactly meet your and your employees’ needs. If you’re not a client, you can request a call back here.

pensions through the pandemic

Posted by Johanna Nelson

Topics: Employee Communication, Pensions, financial wellbeing

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