As a business, you may have a number of employees in the latter stages of their career that are still vital to your business; their level of experience and expertise might be hard to find and, as such, you may be tempted to try and keep them within your business for as long as possible, even beyond the age at which they could be retiring.
However, while holding on to skilled senior talent may seem like the best decision for your business, Adam Burn, our head of pension consulting, presents the case that it could actually be stunting the growth of your organisation and costing you more in the long run.
Key takeaways
- Understand the key risks of not empowering your people to retire when they want
- Learn how a clear exit strategy can actually benefit your ability to retain talent
- Discover why pension governance may be the key to delivering the best pension outcomes for your people
1. Age-related risks
The older we get, the more susceptible we may become to ailments and illnesses, and therefore the more likely we are to require medical assistance or services. With medical insurance premiums being based either on number of claims or the age of individuals, not equipping your people with the freedom to retire when they want could end up costing your company more in the long run than a more generous pension plan or professional retirement planning support.
A greater risk of ailments could also translate to a greater chance of absenteeism. The more time your people spend off work due to illness, the less opportunity they have to apply their knowledge and experience to their roles, which can lead to a reduction in overall productivity and, consequentially, profitability.
2. Career progression
Put yourself in the shoes of a younger employee within an organisation that doesn’t adequately fund a pension or equip its people with the tools and knowledge to retire. Above them in the management structure are colleagues who are closer to retirement and may be either financially and/or emotionally ill-prepared to secure the life they want in retirement. After this eye-opening glimpse into what their life could look like at the same company in later years, would there be any incentive to remain within the organisation?
It goes back to my initial point of maintaining the balance within your organisational ‘ecosystem’; it’s these employees that should naturally develop to the point where they’re able to seamlessly assume the roles of those that retire when the time is right. If these people were to leave, there would be fewer people to take the place of your retiring people, which could lead to problematic skill gaps, disruptions, and additional recruitment costs as you try to fill these vacant senior positions.
3. Exercising your duty of care
With the increased focus on how organisations adhere to Environmental, Social & Governance (ESG) expectations, supporting employees’ retirement ambitions demonstrates your commitment to both the Social and Governance elements of this. Employees will likely look to you, their employer, to ensure that you’re doing all you can to help them make their hopes of a comfortable retirement a reality.
Without suitable retirement funding or the proper support to retire, one of two things could likely happen:
- Your people will have to carry on working to accumulate the pension pot they need. They may see friends and people their age retiring, which could lead to resentment and cause the commitment to their employer to falter, affecting productivity.
- Your people retire anyway but with less saved in their pension than they need to live the life they want after work.
So, while you may have these valuable members of your workforce for a few extra years, will they truly be motivated to give you their best selves throughout this time?
Governance helps deliver the best outcomes
As an employer, your commitment shouldn’t stop at offering the minimum legally required pension plan. How do you know that your pension plan is suitable for your people based on the pension decisions they’re making? And how do you know that it is appropriately equipping them to retire at the right time, with the right knowledge and savings? The main solution to answering these questions is ensuring that a regular, robust pension governance structure is in place.
By receiving key data on your people’s behaviours in relation to their pension, governance allows you to understand whether your pension plan is providing real value to your people, or if changes need to be made. Pension governance helps you uncover the answer to vital questions, such as:
- Is my contribution structure allowing my people to save enough to retire at the right time?
- Are my people throughout the business appropriately engaged with their pension?
- Are my people informed enough about their pension and the pension landscape as a whole?
By understanding scheme trends and the decisions employees are making, it allows you to consider whether the scheme is providing the right investment, communication, and education your people need to save for the best possible life after work.
Author
Adam Burn, Head of Pension Consulting
For the last 30 years of his four-decade financial services career, Adam has worked in both the pension provider and employee benefit consultancy space, providing valuable advice to employers in relation to their workplace pension provision. This experience and resulting wealth of knowledge has made him a well-respected voice and figure in the pension space.
To find out how we can support you with your pension strategy and deliver key retirement support to your people when they need it most, request a call back from our pension specialists today.