The latest Scottish Widows 2024 retirement report reveals a worsening pensions crisis, with the proportion of people not on track for even a basic retirement lifestyle increasing from 35 to 38 per cent in the past year.
Businesses have a pivotal role to play in addressing this issue by ensuring their payroll management practices support their employees.
The report, based on interviews with over 5,000 people, indicates that many are delaying retirement due to financial constraints.
More than half expect to work seven years longer than they would prefer, and 27 per cent fear they may never retire. Additionally, 54 per cent anticipate relying heavily on the state pension for their retirement income.
Practical steps for business owners
Business owners can take several steps to assist their employees in preparing for retirement:
- Promote higher pension contributions – Encourage your company to match or exceed the recommended 12 per cent contribution rate to help employees build a substantial retirement fund.
- Provide financial education – Offer resources and training to help employees understand the importance of retirement savings and manage their finances effectively.
- Utilise auto-enrolment changes – Take advantage of the future amendment lowering the auto-enrolment age from 22 to 18, enabling younger workers to start saving earlier and accumulate a more significant pension pot over their careers.
- Offer flexible benefits – Provide benefits packages that allow employees to adjust their pension contributions according to their circumstances and financial goals.
The Pensions and Lifetime Savings Association (PLSA) defines a minimum retirement lifestyle as one covering essential needs and allowing for some leisure activities.
For a single retiree, this costs £14,400 annually, while a retired couple requires £22,400.
These figures assume retirees receive the full state pension, currently £11,500 annually for those qualifying at age 66, rising to 67 by 2028.
The increasing number of people unprepared for retirement is a pressing concern that demands immediate action.
Business owners can play a crucial role in alleviating this problem and ensuring a more secure financial future for their workforce.
If you need assistance with workplace pensions, our team of expert accountants is here to help. Contact us today.