Should employers do more for retirees?

The act of ceasing work, and taking retirement, is a huge cliff-edge for many employees.

Virtually everything changes overnight: income, expenditure, friendships with colleagues, home relationships and health issues are all suddenly thrown into flux.

Often the retiring employee is left to navigate through this tsunami of change without any help from their former employer.

This issue may seem of little immediate concern to many hard-pressed employers. Yet there are plenty of good reasons why an enlightened organisation will seek to provide some practical assistance to those employees about to retire.

Employer Drivers:

Public Relations/Good Will

If the retiring employee is provided with no assistance at this important point in their life, it’s quite possible that they will feel the years of hard work have not been appreciated. The danger here is that the retiree may then be publicly negative about their former employer.

Conversely, when some practical assistance at retirement is provided, the retired employee is more likely to act as a positive ambassador for the former employer.

This point matters. Businesses often live or die by their perception, so the more positive the background noise generated in a community, the better for the business.

And don’t forget that the employer may well need some future help from the retired employee. If there is goodwill between the parties, then that assistance is much more likely to be forthcoming.

Employee Engagement

Then there is the impact on those colleagues the retiree leaves behind. The retired employee will usually have close friends amongst colleagues, with relationships sometimes stretching back many years. Contact is likely to be maintained with such individuals, so it’s probably best if the parting is on good terms to avoid any negativity being passed on to current employees, with the resultant damage to their engagement levels.

There is lots of very strong anecdotal evidence to suggest that engaged employees have a significant positive impact on the employer’s bottom- line, so limiting any damage here is advisable.

The abolition of the Default Retirement Age (DRA)

It is no longer possible for an employer to forcibly retire an employee on age grounds alone. Employers are now largely reliant on employees electing to take retirement, and the individual is only likely to do so when there is sufficient income to retire in comfort. This issue could easily turn into workforce stagnation, and that can be a real problem for many employers.

However, if the employer provides the employee with the means or assistance to better understand what income is needed in retirement, and the options to achieve that income, it’s quite possible that a higher percentage of employees will actually retire, thus removing or limiting the stagnation concern.

So there are plenty of reasons why providing assistance to retiring employees should be a ‘must have’ on any employer’s priority listing.

So what’s available?

Below are just a few of the topics that a good employer may wish to consider. Many of these items can be provided at relatively low cost via pre-retirement seminars, workshops, or webinars. Topics covered can include:

Health and Relationships in retirement

It’s important for the switch from a daily work routine to that of a retired person is considered to limit any detrimental impact on health. Understanding how to manage diet and exercise could make a big difference here.

New avenues of interest can also be effective. Many use retirement as a time to volunteer for good causes, learn new skills, hobbies, or further education. All of these items can go a long way to replacing the lost work structure, and again helps the individual to stay fit and alert.

It should also be recognised that retirement can sometimes put a strain on relationships between partners, and also change the perception of the individual within the family unit. So these items should be highlighted and considered as well.

Raising awareness of all the above will provide the retiree with the tools to make positive decisions to ensure that they can get the best out of their retirement years.

Understanding retirement and pension income options

Many employees have been saving for their retirement in a Defined Contribution pension scheme. Such schemes allow the employee to build up a fund of money, and it is only at retirement that the employees choose the type of pension income to be taken. This decision is often one of the biggest single purchases employees will make in their lifetime, yet many do so without advice, or even understanding some of the wider issues.

A significant factor to be considered is the increase in life expectancy. Typical retirement ages have not changed significantly in the UK for many years, yet life expectancy has. The average life expectancy now is around 78 for men, and 82 for women, and these figures just keep rising.

So, the average retiree at State Pension Age can often look forward to a long retirement, and the pension income may well be payable for many decades rather than a few years. It therefore follows that the retiree needs to ensure they select the best possible type of annuity to meet their ongoing financial needs.

Annuity options vary between level and escalating income options, including a spouse’s pension, and more complex options such as linking the annuity to investments, and allowing for health conditions. So it’s important to really understand all these issues and shop around for the best income deals in the marketplace.

But the pension income is only part of the financial equation…

Considering wider finance issues

As mentioned earlier, retirement brings a number of changes, and income and expenditure form a major part of this picture.

Those approaching retirement need to understand the likely changes to their personal tax thresholds and allowances, and what state benefits are on offer. And retirement may also change how the individual manages their money. Should the employee pay off debt, and if so which ones first? Is downsizing an option? How to claim state benefits? These are all big questions, and the retiree will often value being given some assistance in these areas.

Planning for the future

Finally, and not least, some retirees will want to consider the longer term. A chief concern of many pensioners is the desire not to become a burden on their family in later years. Early planning will often help ease these concerns.

Areas that can be usefully explored here include advice on making a Will, Medical insurance, and the possible funding options to provide care in later life. All practical steps that can be taken early in retirement to avoid later issues.

So it’s evident that retirement is a big deal for both the employee and the employer.

Large employers recognised this dynamic many years ago, with many routinely running pre-retirement clinics for staff. Smaller employers can also gain access to such services through many workshops run across the UK.

Regardless of how the support is offered, the employer can provide some valuable support to their employees on the journey into retirement. And if the employer does this willingly, then it’s likely to be beneficial for both parties.

There is support available for employers and employees when it comes to retiring, and companies would do well to seek advisers who specialise in this area to help them.

Steve Herbert is Head of Benefits Strategy at Jelf Employee Benefits