An ageing workforce unable to retire because of insufficient funds could cost UK employers up to £7.4 billion[i] in additional wage costs every year. In addition to this, the stress caused by a lack of pension savings has a highly detrimental effect on productivity and is a major contributor to mental health problems in the workplace.
The ‘Working Late’ report from Wealth Wizards and the CEBR shows that 86% of employees want to retire at or before 65, but two thirds state they don’t have enough pension savings and worry that they are not able to retire at 65 years of age. The average age that workers believe they will be able to retire is 69. Alarmingly, 20% of employees do not believe they will ever be able to retire.
According to the Working Late report, if two thirds of current employees aged 60-64 delay their retirement until 69 instead of retiring at 65, businesses would face over £40bn in additional wage costs over the remaining period of these workers’ employment.
Despite this huge cost implication, employers do not appear motivated to support employees when they retire. Surprisingly, only two out of five employers agree that they prefer employees to retire at 65 rather than to work indefinitely because of insufficient pension savings.
Employees expressed dissatisfaction with their employer when it comes to financial planning support for their future and retirement, and are demanding more help in order to retire earlier. 25% of employees state that their employer does not currently offer financial education but that they would like the company to start to do so, whilst 49% of over 55 year olds believe that employers should be required to ensure that their employees are financially stable at retirement. This increases to 59% amongst those aged between 18 and 34.
However, employees recognise that pension under-saving is partly of their own making with 56% wishing they had added more to their pension pot when they were younger. This is perhaps exacerbated by the fact that employer support for pension saving still varies substantially. The research showed that a third of consumers say their employer only matches pension contributions up to the legally required minimum of currently 1%, whilst less than a quarter state that their employer offers to match pension contributions rates above 3%.
Phil Blows, Director from Wealth Wizards comments:
“The research from Wealth Wizards suggests that there is a disconnect between employees and employers when it comes to retirement age, and while employees want to retire at or before 65, many lack sufficient funds and are being forced to work into later life for financial reasons. While some employers lack awareness of the importance of supporting their ageing workforce in achieving their retirement ambitions, we are seeing examples of positive success for those offering financial advice. For instance, InterContinental Hotels Group saw around 25% of those in its workforce who were saving the least increase their contributions, on average, by more than 100% within just a 9 month period after undertaking a targeted financial advice project.
The research also found that employers do acknowledge some implications of retaining older employees such as fewer opportunities becoming available for younger workers (58%), less innovation in the workforce and 45% recognising that the costs of employee benefit packages would increase.
Phil Blows continues:
“There is a high demand from employees for their employer to do more to help them achieve their retirement objectives, and by providing financial advice now, it could save employers significant wage bills in the future. Contemporary online and white label financial advice services such as Wealth Wizards provide businesses with a cost-effective solution and employees with a state-of-the-art dedicated online financial adviser to help them navigate the most effective route and achieve their desired retirement age and financial goals.”
About Wealth Wizards
Wealth Wizards is a technology company founded in 2009 that makes expert financial advice accessible and affordable to everyone. It is the UK’s first fully-regulated online adviser.
Wealth Wizards believes that everyone deserves the opportunity to create a positive future and feel in control of their finances. It wants to show that money can help fuel a better future by creating a range of services that give people better ways to plan and manage their money.
Wealth Wizards is pioneering the combination of financial intelligence and smart software technology and is able to deliver expert advice at an affordable cost. It provides consistent and reliable advice tools for advisers and consumers via user-friendly applications across mobile, tablet and desktop devices.
The business partners with progressive financial services companies, to run a white-label technology platform for their brand, and also works directly with employers or alongside pension consultants to offer pension and retirement advice to company employees
For further information, please contact email@example.com or emily @seven-consultancy.com
[i] According to the ONS’ Annual Survey of Hours and Earnings, employees who have held a job for 10-20 years earn on average £7.30 per hour more than new employees. The average job tenure for workers aged over 64 is 13 years so continuing to employ an older worker instead of hiring a new one increases hourly wage costs by an average of £7.30. For a full-time employee working 40 hours per week, this equates to over £15,000 per year in additional wage costs. Labour Force Survey figures show that employees aged over 64 work on average 30 hours per week. If all such workers in the UK were to delay their retirement by one year, the cost to employers would total £7.4bn.
ii Workplace Financial Education: A guide for employers, CIPD (August 2012)