Make sure that all staff are kept informed about the state of their pensions
At the current time, the workplace-pensions landscape is a very mixed bag; defined benefit pensions have been largely phased out in the private sector (they’re still around in the public sector and there may be a few private-sector companies who still have them).
Defined contributions pensions are now split between “traditional” workplace pensions and pensions run through the auto-enrolment process, one of the key features of which is that it’s designed to be portable between employers.
You can only inform staff about the workplace pension they have through you, however, you can point out to them that they may have pensions from other organizations and if so they need to know where they are and take a decision on whether or not they should consolidate them.
You can provide this information to staff of all ages, thus avoiding any potential concerns about age discrimination.
Offer all staff guidance on the financial practicalities of transitioning into retirement
There’s a limit on how much direct guidance you can give (unless you’re a qualified financial advisor), but you can direct staff towards0 general guidance on typical financial issues faced by retirees and remind them of the importance of taking the right decision for their situation.
You may even wish to negotiate a deal with a firm of financial advisors so that your employees can receive personalized advice at a more affordable price.
In particular, you may wish to advise your employees to think very carefully about whether or not income drawdown is right for them or if they would be better to use their pension pot to buy an annuity.
This is an important decision which leads to other decisions. For example, if an employee is going to use income drawdown, then they need to think about managing their investments effectively. If they’re going to use an annuity, then they need to pick their product and provider with great care. This is one area where professional financial advice can be extremely useful.
Clarify the necessary administrative steps in the retirement process
If you have a default retirement age then you may be able to set this process in motion yourself and prompt employees to take action as necessary. Default retirement ages, however, are increasingly rare. It’s far more likely that employers will have to assume an employee will continue to work indefinitely (as long as their performance remains up to standard) and wait for an employee to let them know that they wish to retire before they start the retirement process.
In addition to making employees aware of what administrative steps they need to take, it can be helpful to set their expectations regarding how long it will take to complete these administrative tasks.
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